Many Americans are hurting. That much is clear from the response to last week's column summarizing some of the government programs put in place to help individuals and families struggling with unemployment, depressed home prices and lousy mortgages.
The column prompted more than a dozen questions from readers wondering how the programs might help them or how they can tap into them. Many of the questions came from individuals who clearly are in dire straits and not sure where to turn.
I can't address every question individually, but here are three questions touching on the most common theme: homeowners who lost jobs and now worry about losing their homes. In many cases, homeowners believed they were getting nowhere when they contacted their lender for help.
C.S., Milwaukee, Wis.: I lost my job of 19 years as of Sept. 2, 2008, and I am still currently unemployed. My husband was laid off from his job just before Thanksgiving, and still has not been called back. We currently have two mortgages on our home. I have contacted my first mortgage holder three times since December, in an attempt to remodify our mortgage. All three times I was told that since I'm current on my mortgage, there's nothing they can do. The last time I spoke to them was earlier this week. I explained our situation again and was told that no program will be available for homeowners who are "under water" until April 15. Do you know if that's accurate? Unless I find a job in the next two weeks, my best guess is that we will be able to make one more mortgage payment, then that's it. So I'm trying to be proactive in getting something done, but no one is willing to work with me at my mortgage company.
D.G., Phenix City, Ala.: Last year my husband lost his job of 17 years. I have managed so far to keep our loans current. But it's getting harder and harder. I have talked to my mortgage company about loan modification, but they say we make too much still. I have surfed the Net repeatedly but I am lost in the sea of ads. Some seem like scams. How do I know which ones are on the up-and-up? Where do I start? I want to get a better rate before I get behind. I had one so-called expert tell me to let my payments get behind so my mortgage company will help, that as long as I make my payments on time, they won't help? Please help!
J.O., Napoleon, Ohio: I called my mortgage holder HFC to see if I qualified to redo my mortgage to get a lower rate through the government program. They said they couldn't help cause they weren't participating in the program. Do they have a choice? Where else can I go, if the banks are lending new dollars?
Answer: Keep calling, I say to all three of you.
Government Help for Homeowners Facing Foreclosure
The mortgage rescue program launched by the Obama administration on March 4 is just getting off the ground with mortgage lenders and servicers just learning the details now.
C.S., your mortgage company may well be right that help may not be available to you until April 15. I know waiting those few weeks may be difficult for you, but you should not give up before then.
In your case, it sounds like you might qualify for help under what the U.S. Treasury Department is calling the "Home Affordable Modification Program." Under this program, mortgage lenders and servicers are being given incentives to agree to modify existing loans for borrowers having trouble making their monthly payments because of job losses or other circumstances.
A second program, "Home Affordable Refinance," is designed to allow millions of homeowners to refinance into lower-rate or fixed-rate mortgages. It is aimed at homeowners who are current on their monthly payments, but have not been able to refinance because their homes have declined in value in the recent real estate downturn.
This refinance program is aimed at homeowners whose mortgages are owned by either Fannie Mae or Freddie Mac. Be aware that many homeowners may not realize these agencies own their mortgages, and they should check with their loan servicers before concluding they are not eligible.
Borrowers who are delinquent on their mortgages will not be eligible for the refinancing program. Those in this situation should look to the Home Affordable Modification program.
But homeowners who are current on their mortgage payments also can participate in the loan modification program if they are in danger of falling behind. Borrowers should not wait until they are late in making payments before seeking help under this program.
Refinance and Lower Mortgage Payments
The Home Affordable Modification program aims to help homeowners by lowering monthly payments by first reducing the interest rate on loans to bring payments down to the point where they are equal to 31 percent of income. To reach that 31-percent-of-income level, interest rates on existing loans could be cut to as low as 2 percent. If that 31 percent target is not met with a 2 percent interest rate, then lenders will extend payment periods to up to 40 years. Final options could include allowing a portion of principal to be repaid with no interest accumulation and an outright reduction in the principal amount owed.
In all three cases above, there are two telephone numbers I would call repeatedly. The first is to your mortgage servicer to find out about their participation in the Home Affordable Modification program.
According to the Treasury Department, participating lenders will not be receiving contracts to participate in the program until April, so it may take some time -- and more than one telephone call -- to find out what your lender is doing.
In the meantime, many lenders have agreed to delay foreclosures on all loans that meet the minimum criteria for the modification program, according to the Treasury Department.
Also, the Treasury Department is promising to post online lists of participating lenders as they sign up.
The second telephone call should go to a housing hotline operated by HUD, the U.S. Department of Housing and Urban Development. The number is (888) 995-4673. Hotline staffers will most likely put you in touch with a HUD-approved housing counselor who is supposed to help you explore all options at no cost.
HUD and the Treasury Department are warning that in no case should a homeowner seeking help with a loan modification or counseling pay for that help.
"Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan," the Treasury Department advises. "Do not pay -- walk away!"
Treasury Department Mortgage Programs
The Treasury Department Web site dedicated to both the Home Affordable refinance and modification programs is www.financialstability.gov. More details on both programs are available there.
The bottom line for anyone looking to benefit from these programs is that it's going to take some time. I'd call both numbers at least once a week for a couple months.
Don't make one call and then give up. It's going to take time, effort and patience.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
David McPherson is founder and principal of Four Ponds Financial Planning in Falmouth, Mass. He previously worked as a financial writer and editor for The Providence Journal in Rhode Island. He is a member of the Garrett Planning Network, whose members provide financial advice to clients on an hourly, as-needed basis. Contact McPherson at email@example.com.