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Is help too late for homeowners?

For those behind on their mortgages, assistance from the bank settlement and other programs may come too late to save their homes.

By MSN Money Partner Feb 15, 2012 2:18PM
This post comes from AnnaMaria Andriotis at partner siteSmartMoney.
After more than a year of steady declines, the number of households facing foreclosure is once again on the rise again. As a result, some housing experts fear a series of federal government plans to help struggling homeowners could fall short.


The rate of borrowers who are 60 days or more past due on their mortgages rose slightly, to 6%, in the fourth quarter of 2011, according to data released today by TransUnion. That marks the second consecutive quarterly increase since the rate began falling from its peak of 6.9% at the end of 2009. Though small, the increases signal more problems for the troubled housing market, experts say. Indeed, some 37 states had more so-called mortgage delinquencies, while nearly two-thirds of metropolitan areas had increases.


"These indicators continue to provide evidence of a weak sector overall," says Stuart Gabriel, the director of the Ziman Center for Real Estate at the University of California, Los Angeles.


For homeowners who are behind on their mortgage payments, a growing number of programs provide assistance. For example, as part of the government's settlement last week with five banks over alleged foreclosure abuses, delinquent homeowners can qualify for a principal reduction, says Jed Kolko, the chief economist at Trulia, a real-estate listing site. That would lower a homeowner's outstanding mortgage balance and should thereby decrease monthly payments as well, he says. Post continues below.

But this program is intended only for those whose mortgage is with one of the five institutions involved in the settlement: Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, which handle payments on 55% of all outstanding home loans. Homeowners with mortgages from other institutions or those that are backed by government entities, such as Fannie Mae or Freddie Mac, are excluded. Furthermore, the program hasn't actually kicked in yet, which means those struggling homeowners will have to find a way to hold onto their homes until the banks starting doling out this relief.


Homeowners who can't afford to wait or fall through the cracks of this settlement can turn to an older government relief program: the Home Affordable Modification Program, which is open to borrowers who are either delinquent or in danger of falling behind on their monthly mortgage payments. But they'll need to meet a host of requirements before they qualify. The program is open to homeowners who received their mortgage no later than Jan. 1, 2009, and whose mortgage payment is more than 31% of their monthly pretax income. They can't owe more than $729,750 on their home and they must be employed.


Unemployed delinquent borrowers with a Freddie Mac-backed mortgage can apply for its recently revamped forbearance relief program, which absolves borrowers from making mortgage payments for up to a year. (Fannie Mae offers a similar program, and it's rolling out changes to it in March.) That might offer homeowners enough time to find work and be able to resume mortgage payments. However, at the end of the relief period borrowers will owe whatever they didn't pay during that time.


Going forward, rising mortgage delinquencies could add to the woes of homeowners and home values. Foreclosures dropped last year after allegations surfaced that bank employees and contractors were signing off on foreclosure documents without verifying information. With the finalized settlement announced last week, it's expected that banks will move forward with the foreclosures that were delayed, thereby further increasing foreclosures in 2012. Should that occur, Gabriel says borrowers in those areas could see their home values decline.


More on SmartMoney and MSN Money:


Feb 15, 2012 5:10PM

Rosewood, you are both right and wrong in your post.  I too do not agree with the government (read:  We the taxpayers!) funding bail-out or assistance programs for homeowners.  And while I am the opposite of a Socialist (Obama-ist!), I think that the answer lies not in a bail-out program, but in across-the-board legislation that requires all mortgage holders (not just the "Big 5"), on their own dime, to rewrite underwater mortgages.


I feel they should not necessarily be required to provide principal forgiveness, but there are a variety of options out there, including reducing interest rates, and in the case of ARMs, fixing them for the remainder of the loan, re-amortizing the loan over a longer life or resetting the inception date at the time the interest rate is reset, etc.  Yes, the banks would lose money in future interest earnings, but it's a drop in the bucket compared to what it would cost them in foreclosures.  Plus, they shouldn't be required to work with borrowers who obviously can't keep up with even a reduced payment.  I'm with you there; some people were sold a bill of goods, but it's not up to anyone to bail them out.


Unfortunately, I doubt we'll ever see an outbreak of common sense of this magnitude on Capitol Hill, at least not with the current group of incumbents.

Feb 15, 2012 4:59PM
Whatever.  Banks still make huge amounts of money on foreclosures and are completely unwilling to do anything that might help homeowners with problems. 
Feb 15, 2012 8:22PM

until fannie and freddie start with the programs it will never get corrected, why is it that almost half of the loans don't get any assistance while the one owned by the banks can get assistance does not make any sense the government should be the first ones jumping in the help the underwater homeowners.


ROSEWOOD the ones that overbought they are already out of the property and down the road now we are dealing with the ones that just cant see paying the bill and walking away for financial reasons because they cant get any help from these companies.

Feb 15, 2012 8:52PM

For those that have not experienced what the banks, brokers, & wall street did to good people all in the name of greed, good for you! You are Blessed. And since you didn't personally experience any of this, you have no right or place to point fingers & blame the average citizen for being duped as YOU HAVE NOT experienced how the banks & brokers, appraisers, underwriters, etc., lied, cheated, & frauded people on their loans, all hidden in the massive pages. Judge not, lest you be judged.


For those that keep throwing around false accusations, try doing the math. When in this country have you ever seen such massive amounts of people having the same thing happen to them at the same time, other than the Great Depression? No one had the right to take away the protective wall of the Glass-Steagal Act which then allowed commercial & investment banking to collide (scheme). No one ever should have been allowed to bet on people's homes & lives like they were any other type or kind of commodity.


Obviously the numbers speak for themselves. Not too mention why so many attorneys & judicials are now trying to get up to speed since the news broke that the banks frauded not just the people, but also our justice system. Try doing your due diligence (research), & pay attention. If so many people are to blame, then why did the Attorney Generals get involved? Why is it all so plain in your face, & yet you still deny? Because you haven't lived it that's why. Small minds & hateful hearts. Trolls & flamers are all you stand for. So many millions wait for your true judgment day, as you are the ones that truly need blessed!

Feb 15, 2012 10:24PM
Whatever new plan Obama is coming out with, there are loopholes and qualifications that almost nobody will qualify for it. I agree that the banks should be made. ( ALL of them) to re-do the mortgages they are holding. Whether or not it's by reducing principals, interest rates on mortgages, or mortgage terms, they should be forced to do it for all. I used to totally support president Obama, but after reading over all of these plans he has proposed & passed, I am sorely disappointed in him. All of them have such loopholes that the people who need help mostly cannot get it. They're all geared to the banks success, not ours.
We've made suggestions for plans all along that would work for the majority. Yet Obama isn't taking our plans into consideration without ruining it's main focus. His focus is all on the banks. So how much are the banks contributing to his income ? Do we really have to believe that he wants to be president to only collect $200,000  a year salary & still have to pay for his own groceries ? Something is fishy in this fishbowl. And I am no longer sitting in the water.

Feb 15, 2012 4:53PM

Still dont get it, why do they get help, saying that it is the mortage companies fault that they gambled and bought over their means. I too could have bought into the scam but used my brain and knew what I could and could not afford. The result, I do not own a home and probably never will. I made the right choice but still I am penalized because of all the bad decisions made by people who are now wanting/expecting  the government to bail them out too. When you buy a home it needs to be because you can afford it and not based on what someone tells you is based on the fantasy increase you will get in your income down the road. It was a gamble and you lost. I chose not to take that gamble and still struggling to stay afloat in this economy but is the government considering giving me 3000 dollars for making the right choice? HA'! Everyone needs to quit whining and get on with it. You bought into a lifestyle that was over your heads and now you are paying the price. Consequences for everything, not bailouts. I too am hurting because the government bailed out banks that are now charging me even more just to bank with them and my average balance these days is under $100! Yes $3000 help from the government would sure make my days a bit easier but nope, I used my brain, did the right thing, and no one cares. Same thing happened to me in the aftermath of Katrina. I was not a home owner so I got no help. My landlord tripled the rent, my job was gone and I was left out in the cold. I can no longer live in my hometown because I didn't matter because again I did not own a home because I did not buy into the scams mortgage companies and banks were offering. You do the right thing you loose all around in this country. Land of opportunity? Not for the home grown working class...


Feb 15, 2012 7:35PM
Again the writer of this dark forcast article and ( gov't bureaucracy)  doing stuff like this probably because they got to eat.

Feb 17, 2012 10:13PM

Not all people are losing their homes because they over borrowed, or got a loan they couldn't afford! Hello!! What about the unemployment issue! People lost their jobs! They can't sell there homes like " how it use to be done" in the past. And really, as for the rest, some of those loan products they used to get people into houses should of been illegal! Please people research the real reason why all this happened! We were all drawn like a moth to a flame, "Own your own home", " the best investment you'll ever make", "It'll always go up in value and you'll have it made in retirement".  There were road signs in every intersection advertising the newest subdivision, hell there were  signs between signs! Advertising new homes with smiling families holding their children in front of their "very affordable new home", "your throwing your money away by paying rent". They didn't care how they got you in...they talked people into loans we didn't even know existed, trusting them, thinking they had our best interest in mind.  So good for you who didn't get suckered or lose your job! But guess what, we're all in this together, even you with the perfect green grass and all your bills paid on time. We all are going to pay for this. And as we get poorer, someone else is getting richer. All that money is going somewhere...

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