Government Mortgage Bailout Programs
- The best-known federal bailout scheme is the Home Affordable Modification Program, which provides financial bonuses to lenders who lower the monthly mortgage payments of homeowners in financial distress. Lenders can lower these payments in one of several ways: reducing the interest rate attached to homeowners' loans, restructuring the loan terms or forgiving a portion of the principal. To qualify, homeowners must have taken out their loans on or before Jan. 1, 2009, must owe no more than $729,750 and must have a monthly mortgage payment equal to at least 31 percent of their gross monthly income.
- The Second Lien Modification Program is similar to the Home Affordable Modification Program. As its name suggests, it provides financial incentives to lenders who agree to lower the second-mortgage loan payments for homeowners who are facing a financial crisis. Again, lenders have the option of lowering the interest rates attached to these loans, forgiving a portion of the principal balances or restructuring their terms. To qualify, homeowners must first have had their primary loans modified through the Home Affordable Modification Program. More than $5,000 must still be owed on their second-mortgage loan, whose monthly payment must be at least $100.
- The Home Affordable Foreclosure Alternatives program provides incentives to mortgage lenders who help struggling homeowners complete short sales in which they sell their homes for less than the amount of their mortgage loans. The program also rewards lenders who accept deeds-in-lieu of foreclosures. Under such an arrangement, the mortgage lender agrees to take over the deed to a house that is facing foreclosure. This allows homeowners to exit the home without having to endure the foreclosure process. The program also provides $3,000 in relocation assistance to homeowners who complete either option.
- While the government offers these bailout programs, it does not itself modify any loans. That task is left to the mortgage lenders themselves.To take advantage of any of these programs, homeowners need to call their lenders.
