Do you live in California, Nevada, Arizona, Michigan or Florida? Good news, President Obama has created a program to help struggling homeowners in these five states. Why were these states chosen? Well, these are the states that have been hit hardest by foreclosures, with properties losing over 20% of their values.
This new program is small, but targeted at the areas with the highest number of struggling homeowners. With the high unemployment rate, homeowners are still losing their homes to foreclosure. The unemployment has been one of the largest factors preventing a full economic recovery.
The new program is aimed at preventing foreclosures. Foreclosures have been found to not only sell for less, but also contribute to lowered property values in neighborhoods. Under this new program, state housing finance agencies will share the funds to test new ways to prevent foreclosures.
Making Home Affordable: Previous Plan Addressing Foreclosures
The previous foreclosure prevention program Making Home Affordable did not reach as many homeowners as hoped. Homeowners complained that Making Home Affordable did not address many issues of today’s problems. Many people are unemployed, so the reduction of payments was still not enough help for these homeowners, and others complained that homes are now worth less than what is owed.
Homeowners who are underwater (owing more than their home is worth) are found to be more likely to give up and foreclose on the home. If you are one of these homeowners, please note that most homes do regain their value over time, and that the loss of value is temporary in most situations. Abandoning a mortgage payment not only affects your credit score negatively, making future homes difficult to purchase, but also is unncessary in many cases.
How to Avoid a Foreclosure
For homeowners who do not live in one of these five states that the new plan is targeted at, there is still help available. If you are at risk for losing your home because of difficulty making the payments, the first thing to do is to call your lender. Foreclosures hurt both lenders and borrowers, so lenders will often work with you on payments if you foresee a late payment in the future.
Secondly, Making Home Affordable can help you reduce your mortgage rate or mortgage payments, so be sure to check and see if you qualify. Lastly, look into a short sale if you can no longer afford your home and owe more than the home is worth. A short sale is a compromise between the lender and borrower, so that the lender agrees to absorb part of the loss from a lower sale price due to the economy. Each situation is different, so be sure to check with your lender as to whether this fits your situation.
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