As a homeowner struggling to make your monthly payment, you may have to choose between things like seeing a movie, Christmas presents or even food on the table just to keep the roof over your head. In a recent press release, HUD, the Department of Housing and Urban Development announced a new loan modification program, which has plans to offer individuals struggling with their mortgage some help.

Note The Changes

The program, being called Hope for Homeowner, has undergone some further modifications. The goal is to get lenders to participate, something that has to happen for anyone to get their loan under the microscope for improvement. The new modifications to the program allow the lenders to write off less of the loan value than in prior situations.

The homeowner will benefit from this program because the lender will renegotiate the mortgage with them. They get a lower monthly payment and therefore have the money they need to make the monthly payment. In order to help make this possible, the loan terms (the length of the loan) can now go to as much as 40 years.

The Hope for Homeowners program is designed to help individuals to get into new loans if they are struggling with their own. The goal is to make the loans affordable for each borrower, so that foreclosure can be avoided. To do this, the rules of the program state that the monthly payment on the mortgage cannot be more than 31 percent of the homeowner’s monthly income.

The rules also allow for the lender to write down the loan to 96.5 percent f the home’s actual value. This is up from the 90 percent it was when the program first came to be this summer.  Another change is in the amount of debt that the home has. As a homeowner, you may not have household debt of more than 43 percent of your monthly income.

In order to qualify for the Hope for Homeowners program, your home loan must have originated prior to January of 2008. You also have to have a loan amount that is lower than $550,440.

Do You Qualify?

Many people may qualify for this program. Others may not. All should make the move now to find a solution to their current financial situation.  The Hope for Homeowner program is one option that many people have, and anyone who may be struggling right now to make their loan payments should contact a loan specialist to get some help in qualifying.

If you are otherwise struggling with your debts, even if you do not quality for this specific program there is still help available to some. Refinancing your loan is an option. There are also program in place to help you to liquidate the lien you have on your home through a second mortgage or equity line, so that you can actually qualify for the Hope for Homeowners program or refinance your home otherwise.

These changes to the program may in fact help encourage more lenders to start working with their struggling borrowers. You do not have to wait to see if your lender approaches you, though. In fact, you likely should not do this. Rather, you should work with an FHA loan specialist or other lender to try and find a better solution for your loan. In many situations, homeowners are never aware that they do have options for saving their home.

In fact, even if you are not behind on payments or struggling to make them, these professionals can help you to refinance your loan into more affordable terms or to help you simply to save money.

Announced on Friday, the two largest lenders in the country, Fannie Mae and Freddie Mac, will not pursue foreclosures on some homes set to go on the chopping block in the coming months. More than 16,000 homes will be able to stave off foreclosure until January 9^th.  The only homes that may not qualify are vacant homes.

While the gesture buys these homeowners time, it is not a lasting fix. For any homeowner who may be included in this process, the two powerhouse lenders are trying to determine if you qualify for the new loan modification program that occurred recently. 

What are the options for someone who is in this situation or perhaps even someone that is heading into it? Let us look at what you can do now, even if you are not directly feeling the effects by these foreclosures halting.

#1: Do nothing, buy yourself some time over the next few months if you do have a Freddie Mac or Fannie Mae backed loan. If you aren’t fighting the foreclosure, you have a bit longer to find a new place to live. This is not the recommended option for most, though.

#2: Contact your lender and find out if the lender is offering a loan modification program. If you have a loan backed by either of these agencies, they you will find they will be willing to work with you to find n option, if one is out there.

#3: Contact your lender (even if you do not have a Fannie or Freddie backed loan) and as for loan modification or help in getting your loan caught up. Many lenders will work with you, even during the foreclosure process, since they are losing a sizable amount of money from each foreclosure.

#4: Call a foreclosure specialist or FHA approved specialist to give you the help you need. These professionals can work with you to find out what help is available and give you advice on what all of your options are (not just those that your lender wants you to consider.) This is the best recommendation for anyone struggling with their mortgage.

Unfortunately, while Fannie Mae and Freddie Mac do get a lot of attention since they are government backed companies, they are not the only lenders out there who are facing large numbers of foreclosures. In fact, the two only have about 20 percent of the delinquent loans on the books.

An estimated 4.4 million people are struggling to make ends meet and may undergo foreclosure in the coming year according to the Federal Deposit Insurance Corporation.  Each of these individuals is struggling to make ends meet and most of them need some type of support now, before the process worsens.

Many people will qualify for the new loan modification programs. If you are unsure if you do, or you need to know your options, don’t wait. There is nothing worse than waiting too long only to find out that you could have saved your home last week (after a certain amount of time, the foreclosure process is difficult to stop.)

For those who are struggling with foreclosure, contact a professional FHA specialist to get help now. If you are not currently suffering from foreclosure yet, but you are worried that this will become a problem for you in the coming months, act now. While the government is not going to protect your loan totally, there may be options including refinancing r restructuring of the loan. These options can help you to get back on track before the problem worsens.

The FHA, or Federal Housing Association, has grown in the last two years to a considerable size. This just shows how important this one agency can be when it comes to helping a country to get out of the mortgage hole it is in. The latest numbers are quite considerably. By the end of 2008, FHA will provide guarantees for as many as 3 in 10 American home loan borrowers. 

FHA provides only a guarantee to the loan, not the loan itself. Traditional mortgage lenders qualified to work with FHA still fund the loan and service it. Should the borrower default on the loan, FHA will pitch in to help cover the costs of the loan. This helps to insure the loan and therefore allows more lenders with assurance that they can lend to these buyers.

Many of the people that will be included in that picture are those with bad credit. Others are those who do not have any verification of income on the books (FHA loans can help hard to qualify lenders to get these loans.)

As you may know, the HOPE for Homeowners Program kicked in on October 1st, 2008 and gives FHA even more opportunity to help the average homeowner. The program is aimed at helping people to get better loans.  The program was put in place through Congress action and the Bush Administration. It gives FHA the ability to guarantee up to $300 billion in home loans. These are fixed rate home loans specifically for those who are struggling.  The program will be in place over the next three years.

What does this mean for the outlook? According to the Congressional Budget Office, there will be about 400,000 households in the US that will get FHA home loans in the coming years.  OF those, it claims that about one third of them will fall behind at some time on those loans.

What’s the risk?  There is risk here in the Hope for Homeowners program, according to some. They fear that the government is taking on some of the worst loans out there and that this could pose a risk.  Yet, FHA loan requirements are out there and they are much stricter than those offered subprime loans in the not so distant past.

FHA loans make sense and the ability of the FHA to provide this type of backing to the American family is necessary. The fact is: the only way to get out of the housing slump is to get good home buyers buying homes. This program and others like it, will continue to do that.

President-elect Obama has long been a supporter of FHA. In fact, he mentioned FHA loans during his first appearance in the national spotlight, his 2004 DNC Keynote address. And that was long before most Americans even knew (or remembered) what FHA was!

After the war, they studied on the G.I. Bill, bought a house through F.H.A., and later moved west all the way to Hawaii in search of opportunity.
-Barack Obama, July 27, 2004

Over at the Visionary Homebuilders of California blog, Carlos Ramirez has written a great post detailing Obama’s proposals for the FHA, the housing market in general, and ending predatory lending. I recommend checking it out!

Are you a homeowner in the United States looking for the American Dream? If so, you may be in trouble if you still have an ARM, or Adjustable Rate Mortgage. As you likely know, the last year or two has been very bad for the housing market and ARM rates are one area in which the problem got worse. Yet, many of those who did pick up a loan since 2002 have had that loan adjust already. This is the shock that has hit the housing market. There may be more shock coming.

What’s A Mortgage Reset?

Mortgage resets adjust the interest rate on the home loan a person with this type of loan has.  For example, let’s say that you have a home loan with an interest rate of 6 percent for the first three years.  You picked up that loan in 2006 and have since had no problems paying your mortgage loan. Now, the reset period is coming to an end and you are worried. When your loan resets, what is the likelihood that the loan will be too expensive for you?

There is a new wave of mortgage resets set to hit the country in the next months, and will likely continue through 2010 as a number of “option ARM’s” were put in place. These are subprime loans and some are not.  The point is, they are adjusting in the coming months which will cause a new wave of homeowners unable to pay their payments.

Do Something Now

If you are a homeowner with an option ARM or any other adjustable rate loan, now is the best time for you to make a change. What you will need to do is get that loan refinanced as soon as possible, before the loan is in fact adjusted.

FHA can help you to get into a more affordable loan if your loan has recent or will do so prior to the end of 2010.  This will be an outstanding opportunity for you to get a lower interest rate, fixed loan that likely could save you a substantial amount of money.

The worst thing you can do is wait it out. Right now, interest rates are very low. Even those with credit scores that are low may qualify (currently the FHA will accept credit scores at 580 or above.) You have the opportunity to save substantially.

Estimates are that some $500 billion worth of mortgages will be affected in the next four years by these adjustable rates. The FHA can help many to get out of this problem.

Before things really hit the fan with the housing market there were many proposed changes to FHA. When the sub-prime crisis went into full swing things got quite rushed and now it seems that FHA requirements and limits are different every week. On the Seattle Real Estate blog, Rain City Guide, Rhonda Porter offers a great rundown of all the current changes to FHA and things that will be changing in 2009.

One change that I’d like to touch on: Down Payment

Here’s Rhonda’s description of requirements that are effective January 1, 2009:

Minimum down payment increases to 3.5%. Home Buyers have until the end of the year to purchase under the 3% down payment requirement. Sellers can pay actual closing costs once the buyer meets the minimum down payment requirement (which can be gifted or loaned by a family member).

Some of you may recall that when FHA Modernization was in the planning stages some legislators were pushing for as low as zero down and for a time it seemed that it’d be under 1.5%.

Why the change to 3.5%?

The answer is simple: Legislators realized that dropping the down payment amount could turn FHA into the new sub-prime. Although this change will make it harder for some to be eligible for FHA Loans, it is also insuring that FHA Loans are being given to those who can afford to be home owners.

Across the board real estate experts feel that the bottom of the housing market has been hit, or at least it is very close in most areas. This is good news because once you hit bottom there is only one way to go.

There is some evidence of this out of the Mortgage Bankers Association.  In the week ending October 10th, home loan applications rose a total of 5.1 percent. This is good news because it means more people are getting out there to get a new home loan either to buy a home or to refinance their current, less than perfect loan.  According to the Mortgage Bankers Association, the seasonally adjusted Market Composite Index was in use to register 489.3 points in this week.

The jump is a full 5.1 percent over the previous week. Granted, this is much lower than the rate for the year before, but in the current housing market, any gain is a good one. So, where is this coming from?  Most of the increase comes from the number of people applying for and getting a refinance of their home loan. These numbers rose 12.9 percent last week. People are refinancing their home mortgages because interest rates are much lower after the Fed cut the rates last week.

On an interesting note, of those seeking new loans, only 2.6 percent of them were ARM’s or adjustable rate loans.  This is good news since these loans are notoriously bad business for many new home owners. I would warn anyone without a serious financial backing to support them to avoid ARM’s.  You will find these are often considered the “cause” of the problem with the housing market, alongside lenders giving the wrong people the wrong loan.

The increase in the number of applications is still low and it will need to continue in order for anyone to see their home values rise. Yet, this is a good sign, especially if it keeps up.

Those who do want to take advantage of refinancing their home loan should invest in help from the FHA. The FHA refinance loans available have some of the lowest interest rates you will find. In addition, their lending criteria are much lower than those of the traditional mortgage lenders out there currently.

If you are in need of refinancing a mortgage or you want to buy a home, there is little doubt that now is the time. The Fed likely will not lower the interest rate further, especially in the short term. Therefore, invest in an FHA loan now and get a fixed rate.