If you're one of the estimated 11 million Americans who owes more on their home than it's worth, read this post.
On September 22, we published a story in both print and video about a new federal program designed to help homeowners get their mortgage reduced to less than their home is worth. If you missed that story, check out New Program May Reduce Mortgage Principal for Underwater Homeowners.
Shortly after that story aired on the NBC affiliate in Miami, I was contacted by a viewer there who asked for some additional guidance getting into the program. I gave him more information and requested that he keep in touch and tell me how things worked out. Following is his first email – he does a super job detailing his experiences, and offers shortcuts for others who might follow in his footsteps…
Guinea pig #1 here. Filling you in on my/our ongoing quest. My call today went very well, once I found the right rabbit hole. When I called yesterday (888-995-HOPE…with no info in front of me), I walked away with a case ID# and a (supposedly) inside number (877-369-7284). I called that number today, and, given how long I was on hold, found that the company I was holding way too long for was [redacted]. A cursory glance at their website made me uneasy, even though they are an NFP. So I called the original HOPE number again.
They transferred me to a housing counselor, who turned out to be with CCCS in CA. She was MOST helpful, and I was even able to educate her/them a bit thanks to you. It seems everyone is scrambling along on a learning curve given the newness of the “Short Refi” program. When I asked about adverse credit reporting, she said that would not happen. I begged to differ, reading to her from the HUD mortgagee letter. I had to direct her to the corresponding HUD press release, at which point she put me hold to clarify with her supervisor. She came back and told me what we already surmised…it shows on your credit report as forgiven debt (“acct settled for less than balance”), the degree of negative impact is a) likely minimal given our specific circumstances and b) left to be seen. In 5 years, lenders may look back at this time with an understanding of how screwed up everything and everyone was.
According to the counselor, Chase has been offloading a lot of mtgs, or rather servicing thereof, to LBPS, a relative newcomer to the game. This may be a story unto itself…as it sounds suspiciously like the massive selloff of high risk mortgages that started all this. Not that ours is high risk per se (never missed a pmt), but the negative equity position alone creates a higher degree of risk, esp with the growing “strategic default” movement. Owning this home means we have over $100K of unsecured credit, so walking away has a lot of appeal. For a firm to jump into the mortgage servicing business now seems odd at best, nefarious at worst. I further found that LBPS does not offer refinancing (from their website), but had been pressured (via consumer complaints, according to rep) into partnering with Greentree for refinancing. She went on to say that I was not compelled to use Greentree, suggesting that I call FHA (since approval will come from them anyway) and speak to a loan officer for direction. Play dumb re Greentree…“What lenders is FHA working with for the short refi program?” She also suggested I call FNMA, just to be thorough.
She did a standard loan qualification interview…debts, income, expenses, etc….at the end of which she stated that we likely qualified for the short refi option. She will submit our information to LBPS, which will get back to us with a determination and instructions within 7 business days.
One of the interesting realizations I had was that Chase has absolutely nothing to do with the first mortgage now, with FNMA as the lender and LBPS as the servicer. I believe this to be good news, as FNMA is more likely to bite on a short refi than Chase. We’ll see on the 2nd, according to the rep many lenders are flat writing them off when they are as small ($36K) like ours. One can only hope.
The other thing she mentioned was the Hardest Hit program, but we weren’t sure what effect that would have on me/us personally. Apparently there is (or soon will be) a pilot in Lee County, statewide rollout Feb 2011. Depending on how long our process takes, it may help us. In short, it means “more money to help more people for a longer period of time” For us the question may be “when does it kick in statewide?”
At the end of the call, she thanked me profusely, saying she wished everyone that she worked with was as literate and educated. It felt good, will feel even better if we can pull this off. The 115% thing means total 1st and 2nd loan can’t exceed $95K (using Zillow’s generous $82.5K est, the unit above us about to short sale for $65K). Here’s hoping, h*ll praying.
Hopefully our reader will continue to provide updates so you can learn first-hand what it’s like trying to navigate the government maze of programs designed to reduce the damage from our nation’s ongoing housing crisis. This diary of despair – and hope – is more than just a potential path for others to follow: One day it will become a little bit of history.