Recession Rescue: Where to Go for Help

Since January, we've heard about programs to help the unemployed, prevent foreclosures and stimulate the economy. We know trillions of taxpayer dollars are being spent to avoid a second Great Depression, yet many Americans have little idea where to turn for help as individuals.

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In many cases, individuals are going to need to take action on their own. They can't wait for somebody to come knocking on their door.

With that in mind, here's a summary of a few of the major initiatives in place to help improve the financial lot of individual American workers, retirees and homeowners and details on where to turn for help.

Foreclosure prevention: President Obama's Treasury secretary, Timothy Geithner, last week announced the details of the Making Homes Affordable program. This includes a mortgage refinancing initiative for homeowners who owe more than 80 percent of what their homes are worth now. The program's second part is an effort to modify existing home loans to lower payments and help homeowners avoid foreclosure.

The refinancing program is aimed at homeowners who have a solid payment history on an existing mortgage on a primary residence, but have been unable to refinance into a lower-rate loan or from a current adjustable-rate mortgage into a fixed-rate one due to the drop in real estate values.

This refinancing opportunity is available only to loans owned by Fannie Mae or Freddie Mac, the government-sponsored companies that buy up many of the mortgage loans made in this country. The Treasury Department estimates 4 million to 5 million homeowners will qualify.

Chances are that many homeowners have no idea Fannie Mae or Freddie Mac owns their mortgages. Even if you still receive account statements from the bank that originally issued your mortgage, it could be owned now by Fannie or Freddie. For that reason, you should check with the company to which you send your monthly payments.

You can also check directly with Fannie and Freddie:

Fannie Mae: 800-732-6643 or www.fanniemae.com/homeaffordable

Freddie Mac: 800-373-3343 or www.freddiemac.com/avoidforeclosure

To apply for a Home Affordable Refinance loan, homeowners should contact their mortgage servicer directly. This refinancing program is in place until June 2010.

The loan modification initiative seeks to lower monthly mortgage payments for struggling homeowners by lowering the interest rate on existing loans to as low as 2 percent. Also, in some cases, a portion of the loan balance could be reduced.

As an incentive to borrowers, the Treasury Department will reduce loan balances for each month they make on-time payments. Over five years, those reductions could cut up to $5,000 on the amount owed.

The loan modification effort will be in place until the end of 2012.

The Treasury Department is warning homeowners interested in either home affordability initiative to avoid outfits that offer help applying in exchange for a fee. Instead, the department is encouraging homeowners to contact a HUD-approved housing counseling agency.

The best source of information for either Making Home Affordable program is a new Treasury Department Web site: www.financialstability.gov.

There's an online self-assessment tool to help you determine whether you are eligible for either a loan modification or the refinancing program.

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