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What programs are available to help me avoid foreclosure?

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Q: Hi, if I don't qualify for HAMP or HARP mortgage modifications, are there any new 2014 programs by the government or the state of Illinois to help struggling homeowners who want to stay in their home?  I refinanced in May 2013, but my mortgage company can't help me until May of this year, although I've been with them for 8 years. Thank you for your help.

A: Thanks for writing. Just to be clear, the government offers a mortgage refinance program (HARP) and a mortgage modification program (HAMP). Both efforts are only for borrowers with loans owned or backed by Fannie Mae or Freddie Mac.

HARP is designed to allow homeowners, no matter how far underwater, the chance to refinance their mortgages to a lower interest rate. HAMP is designed for homeowners with loans owned or back by Fannie Mae or Freddie Mac who are struggling with their mortgage payments and believe they may soon wind up in foreclosure.

HAMP and HARP: What’s the difference?

While seemingly similar, HAMP and HARP serve two different audiences. Harp allows borrowers who are current on their mortgage payments but can’t refinance due to change in circumstance—such as reduced income or owning more on the mortgage than the home is worth—the chance to refinance at current mortgage rates.

HAMP targets homeowners who are struggling to stay current on their monthly payments and headed for foreclosure. HAMP adjusts your mortgage terms (extending term, lowering interest rate or payment forbearance) until your monthly payment equals no more than 31 percent of your Monthly Gross Income. If your mortgage payment is already below that level you are not eligible for HAMP.

Shop around

Even if not under HARP, if you refinanced your loan in May 2013, you might have one of the lowest interest rates seen in the last 60 years. According to HSH.com, the monthly average for a 30-year conforming fixed-rate mortgage in May 2013 was 3.49 percent.

If you decide another refinance is what you need, feel free to shop mortgage lenders until you find one that can meet your needs. You can use a site like HSH.com to see current mortgage rates and get in touch with several mortgage lenders to compare rates and terms.  If you got a 30-year fixed rate mortgage last May, the chances are slim that you will find a lower interest rate in the current market than the one you already have.

The waiting period

In terms of why your current mortgage lender is making you wait a year before you can refinance again, they may have some form of “seasoning” period which requires borrowers to wait a given period of time before they can refinance (again). That said, we couldn’t find a document at Fannie Mae that discussed a seasoning period in relation to HARP.

No new federal programs (at the moment)

There has been some talk about a new wrinkle to the HARP program now that Mel Watt has taken over as head of the Federal Housing Finance Agency, but there has been no official action by lawmakers (at this point) to put this updated program into place.

Judging by your question, I can’t determine why you weren’t qualified for either HAMP or HARP (is your mortgage not guaranteed by Fannie Mae or Freddie Mac?) so I’m not sure if an updated HARP refinance program would be of much help. I have heard that the latest update to HARP (known as “HARP 3.0”) could expand the program in several areas, including allowing loans originated after May 31, 2009 to participate.

Statewide programs

Just as different mortgage lenders offer different mortgage-relief programs, so do individual states. In addition to offering programs geared toward homebuyers, states also offer programs specifically designed for homeowners. Illinois is no different. Here is a breakdown of some of the programs Illinois offers homeowners:

Grants for low-income homeowners:

  • Single-Family Owner-Occupied Rehabilitation (SFOOR) Program: The SFOOR program provides financial assistance to low-income residents in need of home repairs. 
  • Home Modification Program: This program provides financial assistance to elderly or disabled homeowners who need financial assistance in making their home more accessible.
  • For more information, visit: http://www.ihda.org/homeowner/grantHomeowner.htm

Foreclosure-prevention programs:

  • Illinois Foreclosure Prevention Network (IFPN): State agencies and non-profits work together to provide resources to homeowners in need. For more information, visit: http://www.ihda.org/homeowner/facingForeclosure.htm AND http://keepyourhomeillinois.org/
  • Counseling: HUD-approve counselors can offer free “foreclosure intervention and loss mitigation” counseling to struggling homeowners. Call this number (1-800-995-HOPE) or visit www.findaforeclosurecounselor.org to find a local counselor.

Please let us know if we can help you answer any additional questions.

About the author:

TMTim Manni is the Managing Editor of HSH.com and the author of the site's daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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