How to Get Government Financial Assistance to Avoid Foreclosure

If you are about to face foreclosure, you are not alone. In any given year, one in 450 homes will go into foreclosure. Unfortunately, 2009 was not a set year and in some areas the foreclosure rate was much worse, especially in certain areas of the country. For example, according to RealtyTrac’s foreclosure report, one in 60 Las Vegas homeowners is facing foreclosure. In Fort Meyers, Florida, it wasn’t much better, at one in 65 homeowners, while Bakersfield, CA, has one foreclosure per 85 homes, and in Phoenix it’s 1 in 110 homes.

Foreclosure rates like these are what prompted the federal government to start some financial assistance programs to try to stem the tide. The problem is not only for those who are closed. It affects all the other houses in the neighborhood as well. According to Apgar and Duda’s report “Collateral Damage: The Municipal Impact of Today’s Foreclosure Boom,” homes surrounding a foreclosed property can experience a decline in property value of up to $220,000.

This also affects state and local governments, which must bear a large percentage of the associated costs, including increased law enforcement, administrative, fire department, judicial, and legal costs. In some cases, this can exceed $30,000 per property. Faced with such dire circumstances, it’s easy to see why federal, state, and local government assistance programs have sprung up to help homeowners avoid foreclosure.

These are some of the most widely used government programs aimed at mitigating the effects of the boom in foreclosures. At the state and local levels, there are Home Finance Access (HFA) agencies that provide mortgages to first-time homebuyers and refinancing opportunities for at-risk borrowers. Most state governments have initiatives to help homeowners who think they are headed for trouble.

For example, the state of Washington has the Department of Financial Institutions. The agency will help homeowners through a variety of means including a partial deferral of property taxes, counseling and more. Most states have similar agencies or departments.

The State of California offers financial assistance to various agencies that will help people. However, due to ongoing state budget problems as of December 2008, the California Department of Finance suspended most payments to these programs in an effort to conserve funding.

In Colorado, the State Division of Housing implemented a 90-day foreclosure stay program that gave homeowners a 3-month window to redeem their homes. There are restrictions for this and similar programs, such as the home must be an owner-occupied primary residence, the loan obligation must be less than $500,000, and the owner must intend to live there as their primary residence after resolved the foreclosure.

Most states have some type of similar financial assistance program for homeowners in distress. You can combine state assistance with the even more valuable help you can get from the federal government.

A great resource to help save your home is available through the federal government. If you are having trouble making your monthly mortgage payment and fear you may be at risk of foreclosure, you can consult a Housing and Urban Development (HUD)-approved housing counselor. Such advice is provided free of charge and is paid for with federal tax dollars. Their job is to show you what programs are available and help you determine the best alternative to keep your home.

If you have an FHA mortgage, and a good portion of troubled homeowners are financed that way, there is also the special FHA loan modification or forbearance program. As the name suggests, it’s only for FHA-backed loans. The program requires a special written forbearance agreement between a borrower and the lender. It is for homeowners whose FHA-insured mortgage is at least three months but not more than 12 months past due. Also, the property must not yet have gone into foreclosure.

To be eligible for the FHA forbearance program, you must:

– Have a good pay history and stable employment history prior to this breach
– Have a verifiable loss of income or an increase in living expenses
– Be actively looking for work, but have not received a firm reemployment commitment when the lender is reviewing the borrower’s financial information.
– Be a current owner-occupant and must continue to occupy the property as a primary residence during the term of the special forbearance agreement.

If you need more direct financial assistance, the federal government has several aid programs for you. One of the best known is the Obama administration’s Making Homes Affordable program. This federal program targets homeowners who are in imminent danger of losing their homes to foreclosure. The mortgage modification part of the Home Affordable Program is commonly known by its acronym, HAMP, or Home Affordable Mortgage Program. Homeowners are eligible for mortgage interest rates as low as 2%, and even a reduction in mortgage principal, if needed to make their home loan affordable.

These financial assistance programs from the state and federal government can really help you keep your home when it would have otherwise gone into foreclosure. The HAMP program in particular can be a lifesaver.

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