Some homeowners have been focusing on pursuing a modification program as federal initiatives like the Making Home Affordable assistance plan have been able to modify the payments of many homeowners who are suffering from financial distress which may have resulted in foreclosure if some sort of action and not been taken. Yet, despite the fact that there are still increases being seen in HAMP, and reports that are set to be released in early October tracking data through August will likely show that increases have been seen in areas like permanent modifications, there are still areas like trial modifications that many feel need improvement and as a result are looking at alternative plans beyond a modified payment.
In 2009 when the Making Home Affordable Program began many homeowners were simply looking for a way to get a more affordable payment when problems like an adjustable rate mortgage made their payment obligation incredibly difficult to meet due to downturns in the economy and devaluation in home prices, but since then we have seen more issues arise that homeowners are attempting to overcome and in some cases a modification simply does not help. As an example, it was discovered that when a homeowner who is unemployed uses their unemployment benefits as income on a HAMP application, this previously may have allowed some to acquire a modified mortgage payment but since this type of income is not permanent and long-term joblessness has begun to be more of a problem, many homeowners defaulted even when the modification was in place.
Obviously, this is not something that has been phased out entirely, as unemployed homeowners are no longer able to claim unemployment insurance benefits as income in terms of qualifying for a modification but there are still homeowners who are defaulting once again after receiving a modified payment plan. Yet, this is where extension programs are being stressed and state-specific initiatives are being set in place to help homeowners who are not simply in need of a more affordable payment on their home loan but need to address issues that go deeper in terms of hindering the financial health of a homeowner.
One example of these assistance plans that are part of the extension program within HAMP are the Home Affordable Unemployment Program, which may allow homeowners who are unemployed to get a reduced mortgage payment or even a 12 month forbearance on their home loan payment, but there are also programs that may address issues like negative equity as well that some homeowners feel can be helpful if they qualify. Yet, here in September, and over the past months this summer, we have seen some issues arise in relation to how many people these programs help as initiatives like the Home Affordable Refinance Program can potentially help homeowners in a negative equity situation receive more affordable payments on their home loan but due to restrictions some homeowners simply may not qualify.
However, the takeaway message that many advisers want homeowners to understand is that modifications are not their only option, despite the fact that there have been some homeowners who have greatly benefited from programs like the Making Home Affordable initiative, but when problems like negative equity or unemployment are in place, homeowners may benefit from turning to their state housing agency or contacting the lender to begin the process of applying for alternative plans that may address unemployment problems or underwater mortgage issues.