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Uncle Sam helping owners 5% underwater at no cost

Ilyce Glink
Inman News

Q: The interest rate on my loan just adjusted to 9.25 percent last month. We are upside down on our house by 5 percent, so we aren't sure we can refinance. I'm trying to do a loan modification, but am being told that I have to be late on my mortgage or the lender won't work with me.

I am now current and don't want to miss a payment just so someone will help me. The loan modification company I'm working with wants to charge me a fee of $1,700. Will this save my house? Should I spend this money?

A: I have good news for you. The good news is that President Obama's new mortgage refinance program should help you if your mortgage is only 105 percent of the value of your property.

For example, if your house is worth $100,000, and your primary loan is $105,000, you can refinance your home as long as you have the income to pay the new loan. The home must also be your primary residence.

Lenders will work with you on this program to lower your interest rate so that it is no more than 31 percent to 38 percent of your gross monthly income. The nice part about Obama's $75 billion loan program is that lenders and borrowers have an added financial incentive to keep paying these loans current.

Mortgage lenders will receive a "pay for success" fee of $1,000 for each eligible loan modification, plus additional fees of up to $1,000 per year (paid monthly) as long as the borrower pays on time. Homeowners will receive up to $5,000 (up to $1,000 per year for five years) to reduce the balance owed if they pay on time through these years.

The details of this plan were announced early last month. Please contact your lender as soon as possible. If your lender refuses to help, please call the Hope Now Hotline (toll-free 1-888-995-HOPE) and speak to a federally certified housing counselor.

There are many credit and loan companies out there claiming that they can help borrowers for a fee. Be careful in dealing with these companies. If you pay them almost $2,000, you may not necessarily be getting the best deal. You should first work with your lender, then call the Hope Now Hotline and talk to a housing counselor. ...CONTINUED

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You need to become informed about your options. You may find that your current lender is now willing to talk to you. When you call your lender, ask to speak with their loan mitigation department, particularly if that wasn't the department you were talking to. That department is the one that should be able to work with you on your issue. And, keep that $1,700 in your pocket for now.

Q: I have an interesting situation. A wife was given guardianship over her husband. At some point in time, the wife resigned and her guardianship was terminated. After the guardianship was terminated, the wife got a mortgage on a property owned solely by husband. Is the mortgage void?

A: You should be asking this question of a real estate attorney, and you haven't sent enough detail in your e-mail for me to know for sure what is going on. But I'll give you a short answer to your question with a couple of possibilities.

First, the mortgage may indeed be void, in that it was signed by someone who didn't have an ownership interest in the property. However, if the wife did not have guardianship but held a power of attorney over the financial affairs of her husband, she might have been entitled to take out the mortgage.

On the other hand, this might also be considered mortgage fraud or theft, especially if the wife took cash out of the property after the guardianship was terminated and didn't have a power of attorney. If she used the proceeds of the refinance for her own affairs to the detriment of her husband, she might have also crossed the line in what she could have or should have done.

If this issue involves a family member or friend, you should talk to a real estate attorney. Be prepared to answer how and why the guardianship was created. You should know whether the mortgage was taken out using a power of attorney. If you have a copy of the mortgage you should be able to determine in what capacity the wife signed the document. If she signed it as guardian but the guardianship was terminated, the mortgage company and title company that processed the paperwork might have been duped in not knowing that the guardianship was over. You will need to have the paperwork showing when and why the guardianship terminated. With all of this information, the attorney can give you a better answer.

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