Thousands of Chicago-area homeowners currently are struggling financially and having trouble making hefty mortgage payments, because of shrinking income and heavy credit-card debt.

Uncle Sam’s “Making Home Affordable” program could be one way to keep your home until the economy gets better, experts say.

The Making Home Affordable program is part of President Obama’s comprehensive strategy to get the housing market back on track. Through the innovative program, up to 9 million American families may be eligible to refinance or modify their mortgage cost and lock-in a more affordable payment now and into the future.

The three-phase program outlines the following options — loan modification, mortgage refinance and foreclosure alternatives.

Many homeowners can no longer afford to make monthly loan payments because they have been laid off work or have a cutback in hours. Others have experienced a hardship, such as medical bills. It is possible for many cash-strapped homeowners to qualify for a loan modification to make monthly housing costs more affordable.

A loan modification results in permanent changes to one or more of the original mortgage terms, such as the interest rate or duration of the loan. It often provides immediate resolution to the delinquency by adding back the delinquent payment to the account balance, or grants a temporary reduction in the interest rate to assist in bringing the account back to current status.

Millions of American may be eligible for a loan modification if they are having difficulty making their mortgage payments, or have already missed one or more payments.

This program often results in a short sale or a deed-in-lieu of foreclosure. In a short sale, the homeowner finds a buyer and is able to sell the property for less than the full amount due on the mortgage. When a homeowner qualifies for the HAFA short sale, the loan servicer or investor approves the terms prior to the home being listed for sale.

If all terms of the agreement are met and an acceptable offer is received, the loan servicer or investor accepts the short payoff in full satisfaction of the total amount due on the first mortgage.

Under the deed-in-lieu of foreclosure, the homeowner voluntarily transfers ownership of the property to the loan servicer or investor in full satisfaction of the total amount due.

The loan servicer or investor may require that the homeowner list and market the property before they agree to a deed-in-lieu arrangement.

If you are a homeowner who is current on your mortgage payments but unable to refinance to a lower interest rate because your home value has decreased, you may now be able to refinance under this program.

The loan must be owned by Fannie Mae or Freddie Mac, and must be current, meaning you haven’t been more than 30 days late on your mortgage payment in the last 12 months. Also, the amount you owe on your first mortgage must be the same or less than the current value of your home.

With millions of homeowners owing the bank more than their homes are worth, many are choosing a tactic called “strategic default.” This occurs when a borrower decides to stop paying a mortgage even though he or she may still be able to afford the payment.

When the value of a property has fallen far below the mortgage debt and recovery of the equity lost is expected to take years, a borrower may elect to default based on the mortgage contract.

When a homeowner strategically defaults on the mortgage, the home serves as collateral and the lender has the right to sell the property to get back the borrowed money.

Going deeper into debt to pay for a home with negative equity may be financially unwise. Experts say through strategic default a homeowner uses the law to their advantage, by strategically and legally securing for themselves a more favorable financial position.

For more information on the Making Home Affordable program, call the Homeowner’s Hope Hotline at 888-995-HOPE, or visit www.MakingHomeAffordable.gov.

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By Phil from south Florida
Posted: 10/03/2010 9:05 PM

Any seller thinking of doing a short sale using the HAFA program better make sure they understand the risks before they commit themselves. THey will have to pay 31% of their total household income while they are waiting for the short sale to be processed, find a buyer and finally close. If anything goes wrong, they stand to lose the house to the bank who can take it back without going through the courts. See the special report at www.belroseproperties.com