Sussex residents must be aware of how to save their homes

This month marks the five-year anniversary of the 2008 financial crisis, the worst since the Great Depression. While economists have said our Great Recession ended in 2009, slow economic growth and the housing collapse continue to plague our nation’s economy.

Foreclosures are affecting neighborhoods all over Delaware. Sussex County is no different; in September and October of this year, close to a total of 115 homes will be sold at sheriff’s sales in the county alone. This reality has an economic ripple effect in the neighborhoods where the properties are located, in the communities where families are rebuilding after foreclosure, and in the weakened tax base for funding local schools. So, now more than ever, Sussex County residents need to be aware of what can be done to save their home.

The Making Home Affordable Program is a federal program aimed at reaching a solution between a homeowner and the mortgage servicer so that the homeowner can continue to make payments and remain in their home, or exit gracefully in a way that makes sense economically and logistically.

A facet of MHA is the HAMP, or Home Affordable Modification Program. HAMP allows for a homeowner to apply for assistance in the form of a loan modification if the current mortgage payment is not manageable due to a change in financial circumstances.

The modified loan often has a lower monthly payment that fits within the homeowner’s monthly budget. If a homeowner needs to apply for assistance through MHA, it is because there is a true financial hardship and they need to ask their mortgage servicer for help to make their mortgage more affordable.

While not every servicer participates in HAMP, most servicers have some version of a modification program. The best course of action for a homeowner is to find out what options their servicer is offering before beginning an application for assistance.

Applying for a loan modification takes work on the part of the homeowner. A servicer is not going to agree to modify a mortgage without the proper documentation and an acceptable income level. Several documents are needed for a typical modification request.

First, the request for mortgage assistance form must be filed out completely and correctly. Next, income must be verified. Income is any money coming into the household, with some exceptions. Earned wages must be proven by pay stubs, Social Security with a statement, food stamps with an award letter, pensions with a pension letter, etc. Child support does not need to be included in an application; however, it could be considered if the recipient chooses to include the support as income.

Two months of consecutive bank statements are also required when applying for a HAMP modification. It is beneficial for an applicant to circle deposits from income on the bank statements. Taxes are verified as part of a modification application. Under HAMP, borrowers fill out an IRS 4506-T form; some servicers request actual tax documents from the borrower if the mortgage is being considered for an in-house modification instead of a HAMP modification.

Remember, this is a request from a homeowner to the mortgage servicer to change the terms of the mortgage in order to make payments more affordable. Income must be proven, regardless of the source. One thing to keep in mind is that a modification request will not be approved if it does not appear that a borrower can afford the mortgage.

The goal here is to keep a homeowner in the home if it is affordable, with some changes to the original terms.

If it is determined that the mortgage is not affordable, and the home will not sell for the total amount owed on the mortgage, MHA offers the Home Affordable Foreclosure Alternatives Program. Two components of this program are Deed in Lieu of Foreclosure and short sale. A Deed in Lieu option involves the mortgage company allowing the homeowner to sign the title of the house back to the mortgage company. A short sale is a negotiated sale, where the mortgage company agrees to a sale price that is less than the total amount owed, and the borrower is forgiven the remaineder of the balance owed.

Every homeowner in a hardship has a different financial situation, and as such there are a myriad of possible outcomes available when modifying a mortgage. While assistance from experienced housing counselors is available throughout Delaware, the homeowner must be serious about reaching a solution to save the home. To find out more about Making Home Affordable, a homeowner can visit MakingHomeAffordable.gov or contact their local housing counselor.

Jaclyn Lantieri is housing clinic director for the Delaware Community Reinvestment Action Council Inc., a nonprofit, tax exempt organization. DCRAC, along with NCALL Inc. will host a Foreclosure Prevention Open House Wednesday, Oct. 23, at Georgetown Professional Park, from noon to 7 p.m. For additional information go to www.dcrac.org or call 877-825-0750, Ext. 103.