Networking Magazine May 2009 Strategies for Tough Times

May 2009

Strategies for Tough Times

In order to understand how the economic climate affects your housing situation, the following questions need to be addressed: Are you looking for a rental? Are you considering purchasing a new home? Are you having trouble making your monthly mortgage payments or will be having trouble making your mortgage payment? Are you concerned about your property value declining in this market? These questions will hopefully provide you with some guidance in these hard times. It is important to act on your situation in a timely manner.

Rental housing market
Are you looking for a rental? On Long Island the rental housing stock is approximately 18 % of all housing units. This is very low compared to other areas where 40% is more common. There is a great need for legal affordable rentals on Long Island where young individuals and families can transition to homeownership or seniors can downsize and stay near family. Without this diversity of housing many are left no choice but to leave for other parts of the country.

Many individuals and families can’t afford to purchase or are not ready to purchase a home. If you are looking for a rental here you may be faced with high rent, a high security deposit, your credit not being approved or not being able to find a unit large enough for your family. Therefore, many families turn to illegal apartments that are unsafe and in disrepair. With the looming foreclosures, when a family is forced to leave their home the options are limited. Most families in this situation must chose to move in with other family members, rent an illegal home or move off the Island. We need more affordable rentals on Long Island.

Buying a home
Are you considering purchasing a new home? If you are, you are in luck. The market is better than ever because interest rates are low and the available inventory is realistically priced. If you meet program guidelines, there are affordable workforce homes for sale.

Keys to purchasing a home now are good credit, stable income and the ability to pay your debt. If you are considering the purchase of a new home, Mortgage Counseling at a HUD Certified Not-for-Profit is a must. There is no fee for this service and you will learn the home buying process from searching for a home, going to contract, applying for a mortgage, the closing process and even maintaining your home after closing. This small commitment of time is invaluable. If all homeowners had participated in these programs, predatory lenders would not have been able to wreak havoc and we would not be facing such a huge mortgage crisis.

Paying the mortgage
Are you having trouble making your mortgage payments or do you anticipate having trouble making your mortgage payment? We need to look at this in two parts. If you are current with your mortgage payments, but are struggling to keep up, check out the President’s new program called “Making Homes Affordable.” This program will allow borrowers with mortgages owned or securitized by Fannie Mae or Freddie Mac to refinance. You must be living in the home, be current on your existing mortgage payment, have sufficient income to support the new mortgage debt, and the first mortgage may not exceed 105% of the current market value of the property. If you meet these guidelines, you may be eligible to refinance your current mortgage and should contact to a HUD Certified Mortgage Counseling Agency. There is no fee for this service. They will be able to assist you with your individual situation.

If you are late with your mortgage, there are steps you need to take. First, don’t ignore the problem. Second, contact your lender as soon as you know you realize that you have or will have a problem. Third, contact a HUD Certified Counseling Agency such as the Long Island Housing Partnership. Fourth, read all correspondence from your lender. Usually, the first letter you receive from your lender will give you important information on how to proceed. Fifth, prioritize your spending; health and housing are basic needs that should be paid first. Sixth, know your rights, a HUD Certified Counselor could help you with this also. Seventh, avoid foreclosure companies. Eighth, don’t lose your home to foreclosure scams! Contact the Long Island Housing Partnership, Inc. a HUD Certified Counseling Agency or you can search the web at www.hud.gov or call toll free 800-569-4287 for other HUD Certified Counseling Agencies in your area.

President’s new program “Making Homes Affordable”
This program will help at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. The following are some of the eligibility requirements for the program:
• Loans originated on or before January 1, 2009;
• First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units;
• All borrowers must fully document income, including a signed IRS form, two most recent pay stubs, and most recent tax returns, and must sign an affidavit of financial hardship;
• A mortgage payment (including taxes, insurance, and homeowners association dues) that is more than 31% of the borrower’s gross monthly income;
• Property owner occupancy status will be verified through borrower credit report and other documentation; no investor- owned, vacant, or condemned properties;
• Incentives to lenders and services to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default;
• Modifications can start from now until December 31, 2012; loans can only be modified only once under the program.
For anyone who may need help with their mortgage, reach out to a HUD Certified Not-for-Profit Default Counseling agency such as the Long Island Housing Partnership, Inc. as soon as possible.

Property values
Are you concerned about your property value declining in this market? If you answer yes to this question, then you probably are not alone. In most cases your home is one of your biggest assets. When surrounding properties become vacant or are foreclosed, your property value declines as well. Some studies show that for every home on your block that is in foreclosure your property value drops approximately 6%.

It is important for community stabilization and for the Long Island economy that individuals and families remain in their homes. We all need to work together to solve this foreclosure crisis. It wasn’t created overnight and it will not be resolved overnight. Let’s learn from our past mistakes and move forward to correct them for the future.

Definitions for terms of options you may have:

Deferment- An agreement with your lender to take part of the
current mortgage payment and pay it at a later time;

Forbearance or Repayment Plan- An agreement to take any payments that are past due and catch up by adding part of the past due amount to the regularly
scheduled payments;

Modification- Changing one or more terms of the existing mortgage to make future payments more affordable, either for part or all of the remaining term of the mortgage;

Partial Claim- An additional one-time loan to help a borrower who has a past due balance. The loan will be repaid after the
borrower pays all missed payments on the mortgage;

Short Sale or Short Refinance- The lender agrees to take less than the full amount of the mortgage when the borrower sells or
refinances the home;

Deed-in-lieu of Foreclosure- The lender agrees to take title to the property in exchange forgiving any amounts owed by the borrower. This would prevent a negative mark on your credit report.