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How to Get Out of a Mortgage Gracefully?


As an increasing number of Americans find they are no longer able to pay their mortgage notes each month, how to get out of a mortgage and still keep their homes becoming a burning question. The government has introduced several programs specially designed to assist homeowners who are struggling to keep their homes. While there are certainly a large number of programs available to provide assistance to homeowners and help them avoid losing their homes, the sheer number of programs available to provide such assistance can be overwhelming. Would you benefit more from HAMP or is it better to apply for HAFA? What about HARP? Below is a guide to the largest anti-foreclosure programs offered by the government as well as other foreclosure alternatives.

HAMP or Home Affordable Modification Program

One of the largest anti-foreclosure programs offered by the government is HAMP. The goal of this program is to assist homeowners who took out mortgages at high interest rates during the housing boom a few years ago and assist them by providing loans that are more affordable. This is accomplished through cash that is offered by the government to the homeowner's mortgage company as a special incentive to reduce the homeowner's monthly mortgage payment. The goal is to ensure the homeowner's mortgage payments are no more than 31% of their gross monthly income. The program works by having the lender drop the homeowner's mortgage rate to around 2%. The lender must then agree to extend the term of the loan up to 40 years, if needed, to make the monthly mortgage payments more affordable.

Homeowners who pay in excess of 31% of their pre-taxed income for their mortgage and who also have a loan that is served by a participating lender can qualify for HAMP.

HARP or Home Affordable Refinance Program

The goal of this program is to assist homeowners who are currently up to date on their mortgages, but who are not able to refinance and who wish to benefit from the historic low interest rates available today. One of the most common reasons many homeowners are not able to refinance even though they are up to date on their mortgage is because they are "underwater." This means the value of their home has decreased in light of the current real estate market and they now owe more on their home than it is worth. Most lenders will not agree to allow homeowners in such situations to refinance their mortgages. Through HARP; however, banks are required to make such allowances, provided the homeowner meets certain qualifications and their mortgage is controlled by Freddie Mac or Fannie Mae. The requirements for this program have been further loosened, allowing homeowners who thought they may not have qualified in the past to become eligible.

Forbearance through FHA for Unemployed Homeowners

Homeowners who are struggling to pay their mortgages each month because they are unemployed may be able to receive some relief through a special FHA forbearance program. This program provides up to twelve months of being able to skip a portion or even all of your monthly mortgage payment if you have a Federal Housing Administration mortgage and you have been laid off from your job. During this time, the lender cannot foreclose on your home.

Alternatives to Foreclosure

If you have tried government sponsored programs and you are still not able to save your home from foreclosure, one option to consider is HAFA or Home Affordable Foreclosure Alternatives. This plan allows you to take advantage of a more graceful way of getting out of your mortgage. Through this option you can leave your mortgage voluntarily instead of waiting for the inevitable to take place. The main benefit of this program is that the bank will not pursue a full-out foreclosure through the court. Instead, they will accept a short sale or a deed in lieu of foreclosure. Through a HAFA sponsored short-sale, you obtain some time to try to sell your home at a price that is less than the remaining balance on the mortgage. The bank will be responsible for the difference. In some cases, the bank may even allow you to skip a portion or all of your mortgage payments while your home is for sale.

Through a deed in lieu of foreclosure agreement, the bank will accept the deed to your home as full payment for the mortgage loan, even if you are upside down on your mortgage. With either option, the lender will also usually provide homeowners with $3,000 to assist with moving expenses after the HAFA agreement is final. Homeowners who have mortgages with HAMP participating lenders or whose loans or backed or owned by Freddie Mac or Fannie Mae may qualify.

You might also consider contacting a mortgage counselor that is HUD approved to obtain one-on-one advice completely free of charge. Remember; however, it is always best to avoid companies that specialize in offering mortgage rescue assistance. While these companies may be able to assist you in avoiding foreclosure, there is always a price tag attached and for families who are already financially struggling, that price may be too steep. Furthermore, there is simply no reason to pay someone for assistance that is readily available for free.


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