Underwater homeowners can receive monetary relief

Loan modifications with a principal reduction, and refinancing options are available to make mortgage payments more affordable.

Monetary relief is available for some homeowners whose mortgages are “underwater”, meaning they owe significantly more than the current market value of the property. Many Michigan homes currently meet this qualification and provisions for this criteria are part of the National Mortgage Settlement.

In Feb. 2012, 49 state attorneys general and the federal government announced a historic joint state-federal settlement with the country’s five largest mortgage servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. If your mortgage is with one of these five mortgage servicers, then you may be eligible for help. Other servicers have also agreed to settlements.

You should also check who owns your loan. Go to Fannie loan look-up and Freddie loan look-up. Fannie Mae and Freddie Mac loans are not eligible for monetary relief, but are eligible for the Homeowner Assistance Refinance Program (HARP). In addition, MSHDA HARP Refinance Grant Programs currently has funds to help eligible borrowers to receive $500 toward their closing costs. Grants support refinances for single-family/one-unit, owner occupied and principal residences.

If your mortgage is not a Fannie Mae or Freddie Mac loan, you should contact your mortgage payment servicer about how to apply for a refinance or loan modification.

Some homeowners need a loan modification now. Borrowers who are still in their homes but are behind on their mortgage payments and underwater are eligible for principal reductions on first or second liens. Their lender agrees to forgive a portion of what is owed, which is never collected and is not owed at a later time. Eligible homeowners should have received a settlement relief letter from their servicer in mid-2012 and this modification process is expected to continue for three years. Life happens and financial circumstances change. You could become eligible for monetary relief if you find yourself unable to make mortgage payments during the next few years.

Borrowers who are current on their mortgage but are underwater are eligible for refinancing. They can take advantage of today’s historically low interest rates despite their home’s negative equity. The borrower must have an interest rate over 5.25 percent, have a loan-to-value over 100 percent, and the loan must have originated before Jan. 1, 2009. The interest rate will be reduced to at least 5.25 percent. For more information, visit National Mortgage Settlement and contact your mortgage loan servicer.

Payments will also be made to borrowers who have lost their home in foreclosure through the settlement funds. To learn more see Homeowners to receive up to $125,000 for foreclosure abuses.

Michigan State University Extension provides free housing counseling at its Macomb, Lapeer, Ionia and Washtenaw County offices to surrounding areas. MSHDA certified Housing counselors may be located via the Homeownership Counseling Program website.