While there are some indications that homeowners may be finding more financial stability, it’s no secret that there are numerous men and women who are still having trouble meeting their monthly mortgage payment and as a result are still looking for help from home loan modification programs. Proprietary home loan modifications, which are simply the in-house initiatives made directly available from lenders, as well as, options still available from the federal Home Affordable Modification Program, are offering lower monthly payments to homeowners who are suffering from employment problems, health related issues, or other sources of financial distress may have led to their inability to meet their home loan obligation have turned to these modification initiatives, but there are some instances where this is simply not enough.
Reducing a homeowner’s mortgage interest rate, extending the terms of their mortgage, or even in some cases servicers may be offering forbearance on a homeowner’s mortgage principal to help find more affordable monthly payment options, but homeowners have been finding themselves in situations where foreclosure may still be close at hand simply because they cannot meet their modified payment. Yet, homeowners do have options outside of home loan modification plans when they may have defaulted on this reduced payment arrangement, but not all homeowners are finding that these alternatives are necessarily in their best interest.
Luckily, there are options available directly from various state housing agencies and changes in programs to help specific homeowners, like those who are unemployed, are hoped to give more foreclosure prevention options to those in need. As an example, recently changes were mentioned related to the Home Affordable Unemployment Program, which would offer homeowners a longer of forbearance timeframe that goes beyond the old three month period and would offer some homeowners the opportunity to forgo their mortgage payment for up to a year.
Also, a new home loan program was implemented as a supplement to the Hardest Hit Fund, as a way to allow homeowners to borrow a set amount to help meet their mortgage payment and, if certain conditions are met, this loan will be discharged after a specific amount of time has passed. However, these options may be limited or unavailable for some homeowners and, as a result, in order to avoid a formal foreclosure some have had to turn to alternatives like short sales or deed in lieu of foreclosure agreements.
While these options have been made popular by the Home Affordable Foreclosure Alternatives initiative, homeowners will still be in a situation where they are losing their home even though they may be able to avoid the stigma and problems that arise with a formal foreclosure. While financial setbacks, in relation to a decrease in a homeowner’s credit score, can be related to these alternatives, some homeowners see them as a more optimal path than simply allowing foreclosure to take place, as it can be a positive indication that a homeowner was willing to work with their servicer when they couldn’t make their home loan payment, and future lenders will also know that before a homeowner can qualify for these programs, it must be shown that a homeowner faced financial hardships that may have been beyond their control. Again, these alternatives are not necessarily optimal for some homeowners, but foreclosure prevention options from various states, directly from a particular mortgage servicer, or even extension programs within HAMP still can be explored by homeowners who may have defaulted on their home loan modification plan, as these additional plans have been set in place because homeowners were facing so many outside hindrances to their financial life that a simple modification did not help.