Hope for Homeowners (H4H) - the program primarily calls for voluntary principal reduction to 90% of the current home value, from lenders and servicers and from what we’ve learned (industry news, contacts at large national lenders, secondary market contacts, loan modification firms) this has not been happening. Unless it’s been forced on them (as in the case of Indy Mac, Countrywide and recently Chase) lenders are not ready to give principal reductions. There is a section in the H4H program that does call for mandatory principal reductions by lenders, on the condition that the homeowner makes the case that the lender and their investors will recover more from a reduction in principal to 90% of the home’s current appraised value, than from a foreclosure. It is up to the homeowner to make this case. The FHA (who governs the H4H program) just announced that in the first two weeks after the launch of H4H on October 1st, there were 42 applications from lenders. That number, along with the overwhelming anecdotal market evidence, clearly shows that there is no meaningful activity on reductions. Larger lenders experienced large call volume in the week immediately following the announcement of H4H, but apparently those callers have not been helped.
Other Options - in addition to H4H, many homeowners may be eligible for a standard loan modification, where they receive a fixed rate payment plan for the next five years (or a variation of this). This can be done through a refinance (FHA Secure program) or more commonly, by contacting the lender and proving that the current payment is unmanageable. This adjustment of rates and terms seems to be picking up quite a bit of steam, and in the wake of the recent Indy Mac and Countrywide settlements, an increasing number of homeowners are benefiting from this development. At this point, we feel that contacting your lender and making your case for reduced interest rate or an extended loan term is the most effective option. Other options include a refinance, deed-in-lieu or sale of the house.
We will continue to monitor this developing situation. Keep an eye on the Bills.com home page as we will soon be launching the Bills.com Borrower Relief Center, which will contain tips, advice, news updates and links to other relevant sites.
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