By Steve Freidell
Land Line contributor
How often do we guys know where we’re going and not have to stop and ask for directions? Probably not as often as we’d like to admit. We can be equally stubborn when it comes to asking for guidance with our finances.
Here’s the hard truth: Until someone invents a GPS navigational system for our financial well-being, we’re still going to occasionally have to pull over, swallow our pride, and ask for help.
On that note, many of you have been asking about government programs designed to help people having trouble making their mortgage payments. The good news is that the U.S. government has two programs designed to help financially troubled homeowners. They are called the Home Affordable Refinance Program and the Home Affordable Modification Program. Banks usually refer to them as HARP and HAMP.
HARP is designed for people who are up to date with their mortgage payments but who cannot get a loan to refinance it to a lower rate.
Maybe this is your situation: Several years ago you purchased a home believing your income would grow into your mortgage. You felt home values in your area would continue rising. You felt this property was a good investment and your family could benefit from this house.
Fast forward to the present. There are more “For Sale” signs in your neighborhood than actual neighbors. You are still hanging on by your teeth but you are running as many miles as you can, your spouse now works two jobs, you’ve cut your monthly expenses to the bare bones, and you are getting eaten alive by the rising interest rates. Does this sound familiar?
If either Fannie Mae or Freddie Mac owns your loan, HARP can help you. Call your lender (who is probably just the loan manager and not the actual owner of the loan) and ask who owns your loan. Ask if your situation qualifies for the HARP program. You must be current on your mortgage payments and there are other requirements that you must meet, but many of you will qualify for this program. If your loan is not a Fannie Mae or Freddie Mac loan don’t fret. Many lenders have adopted similar programs, but you do have to ask because they are not likely to volunteer the information.
HAMP is the Home Affordable Modification Program designed for homeowners who already have fallen behind on their payments or expect to do so soon. In some cases, it can help borrowers who don’t meet HARP’s guidelines.
HAMP isn’t just for Fannie and Freddie loans either. However, the loan amount on your single family house must be less than $729,750 and the loan must have been issued before Jan. 1, 2009. In addition, your mortgage payment must exceed 31 percent of your gross pre-tax income to qualify. Not all lenders have access to HAMP, but most of the major ones do. Some lenders are even providing a trial period where your payments are reduced providing everyone time to gather the necessary paperwork to qualify you.
The important thing to remember about either of these programs is that you must ask for directions. The government isn’t going to hold your hand and guide you turn-by-turn. You can start by looking at the makinghomeaffordable.gov Web site. It will provide you with a starting point to get your life back on course.
But remember, it’s still a long and winding road to that final destination – and you, not the government, are ultimately in the driver’s seat. LL
This material has been prepared for informational purposes only; it is not intended to provide and should not be relied upon for accounting, legal or tax advice.
Steve Freidell has assisted clients in their cash management, trading, and portfolio management of fixed income securities since 1975. Steve started his career at the First National Bank of Kansas City and later served as first vice president with Commerce Bank, where he served his clients for 25 years. In 2006, he joined the DeWaay organization, the financial management company used by OOIDA. Steve Freidell may be reached at firstname.lastname@example.org.