ForeclosurePrevention Help for Homeowners Workshop Series Funding for this program is provided in part by the Rock Island Community Foundation
Agenda • Q&A Cards • Taking the First Step • Alternatives to Foreclosure • Understanding Your Household Budget • Preparing to talk with your Lender or Servicer • Making Home Affordable – National Plan • Avoiding Scams • Additional Resources • Break & Collection of Q&A Cards • Packet Review • Answers to Your Questions
Q&A Cards • Write down your questions on the attached cards and they will be collected at break. • If we can’t answer your question at the end of this workshop, answers will be later posted at www.qcdollarwise.org. • Click on the “Help for Homeonwers Link” to find the answer.
Taking the First Step • We all go through tough times & your situation is unique to you. • The goal today to give you the tools you need to take action. • Please treat this as a “safe place” and respect others’ confidentiality.
Taking the First Step • By being here today, you’ve made a big first step toward understanding your options. • You’re not alone - 1 in 3 Americans are somehow impacted by foreclosure. • The circumstances that brought you here may have been out of your control. What matters is you’re here. • This won’t be easy. It will take hard work, but we hope to provide with some practical tools to help you keep your home.
Taking the First Step Don’t Hide in the Sand! • Ignoring the problem makes it worse! • Lenders are much more willing to work with you if you honestly communicate. • Ignoring letters may speed up their actions to foreclose. • Your lender does NOT want your house.
Taking the First Step You have more time than you Think! • The foreclosure process is lengthy in Illinois. • It can take up to 16 months for the typical proceeding from start to finish. • You have time to explore your options with your Lender.
Alternatives to Foreclosure • Forbearance: A lender lets a borrower pay less than the full amount of the mortgage or skip a few payments if there is a reasonable plan to become current on the loan. • Reinstatement: A homeowner is able to make a payment that covers all of the previous late payments.
Alternatives to Foreclosure • Repayment Plan: Allows a borrower who has fallen behind to make additional payments each month until the amount past due is paid. • 90 Day Grace Period: Troubled Illinois homeowners can receive a 90 day grace period under a law signed in April of 2009 by Gov Quinn.
Alternatives to Foreclosure • Home Loan Modification: An agreement between you and your lender to permanently adjust the terms of your mortgage. (Federal Making Home Affordable Program –to be discussed) • Loan Refinance: Allows you to use the equity that you have established in your home to pay the delinquent amount. Depending on the interest rate of your new loan, your monthly payments might be reduced. You can explore refinancing with your existing Lender as well as with any Lender of your choice.
Understand your Household Budget • You must take the time to understand your income and expenses thoroughly. • Review your budget to determine: • Where your money goes • Non-critical items to reduce / cut out • Do you need to work another job temporarily? • What you can afford for housing now - and if the foreclosure took place • Can you afford to keep your house long term?
Understand your Household Budget Worst case scenario: After examining their budget, some households may determine that homeownership has become unaffordable for them. In this case, be prepared and make plans to: • Set money aside. You will need a place to live • Work with an agent to sell your home • Accept that it may be two to seven years before you can consider home ownership again
Understand your Household Budget “Front-End” Debt to Income Ratio • Front end ratio should be below 30 % • Martha and Steve’s total monthly income is $3,800. • Their total housing expense -- loan principal, interest, taxes & insurance -- is $1,200. • $3,800 / $1,200 = 31.5% • Martha and Steve have a slightly higher front end DTI than recommended
Understand your Household Budget “Back-End” Debt to Income Ratio • Martha and Steve’s monthly income is $3,800. • Their monthly expenses -- housing, car payment, credit cards, child care, etc. --is $1,750. • $3,800 / $1,750 = 46 % back end DTI • Back end DTI ratio should be below 42 %
Preparing to talk to your Lender Once you have a full picture of your options, and your household budget you are ready to talk to your lender or loan servicer. • If dealing directly with your Lender or Servicer ask to speak with someone in loss mitigation or ask about a modification of your loan terms. • Do not speak with Collections – their role is simply to collect past amounts due – not work with your need to modify your loan. • Have your account info handy • Summarize your financial problems and why you fell behind (illness, work hours were cut back, etc).
Preparing to talk to your Lender • Have recent income statements & copy of your household budget. • Be absolutely honest & realistic in your budget. You must show that you could make your monthly payment if not delinquent • Let them know you are working with a HUD Approved Housing Counseling Agency. • Ask them about options (forbearance, loan modification, reinstatement, payment plan).
Preparing to talk to your Lender • Questions to ask your lender: • How much time will lender give you to make payments – if arranged? • Specifics - what is due and when? • Will foreclosure proceedings be put on hold while you work on a plan for repayment? • Will they give you additional time if working with a HUD Approved Housing Counseling Agency? • Will they waive fees?
Making Home Affordable • The Federal plan to rework mortgages • Loan modification for eligible homeowners to make monthly payments more affordable • Not a handout - homeowner must show ability to pay if loan was modified • Loans can only be modified ONCE • Borrowers who maintain payments may qualify for incentives
Making Home Affordable • For loans before January 1, 2009 • Primary loan; owner occupied; unpaid balances of up to $729,750 • No vacant or condemned properties • Modifies loan until Dec. 31, 2012 • Reduces monthly payment to no more than 31 % of gross monthly income
Making Home Affordable • Is your payment more than 31 % of your current gross income? • Is the home your primary residence? • Are you having temporary issues repaying your mortgage? • Eligibility test: www.makinghomeaffordable.gov
Making Home Affordable • Must fully document income • Budget • IRS 4506-T form • Tax return • Written hardship letter • 2 most recent pay stubs • Visit www.makinghomeaffordable.gov • Call 1-888-995-HOPE
Avoiding Scams • Scam artists target homeowners mentioned in public records. • Watch out for “foreclosure specialists” that call, visit or mail you, especially if they ask for large deposits upfront. • Scams are on the rise in Illinois. • Beware of any third party who claims they can stop foreclosure for a fee.
Avoiding Scams • Contact your lender yourself as soon as you have trouble making payments. • Contact a HUD approved lending counselor if received a letter threatening foreclosure. • Contact an attorney if you have a pending lawsuit against you. • Never sign away ownership of your house without seeing a lawyer.
Avoiding Scams • Never make loan payments to anyone other than your lender. • Never sign a contract under pressure. • Get all promises in writing. • Check reputations with the Better Business Bureau before doing business. • Be especially suspicious of offers to “lease back” your home
HUD Approved Counseling Agencies • RI Economic Growth - City of Rock Island residents only • 309-788-6311 or www.LiveRI.com • Project NOW - Henry, RI, Mercer counties • 309-793-6391 or projectnow.org • Greenpath Debt Solutions • 1-800-550-1961 / 309-788-6323
HUD Approved Counseling Agencies • United Neighbors - Iowa side • 563-322-7363 or unitedneighbors.com • Neighborhood Housing Services of Davenport • 563-324-1556 • B_hayes-upton@mvnhs@org • www.mvnhs.org