Homeowners who have fallen behind on their mortgage payments face difficult choices.
In theory, a modification of the payment amount is possible. Lenders and mortgage servicers are often unwilling to agree to a mortgage modification – despite financial incentives from the government for them to do so.
Bankruptcy is another possible way to stop lawsuits against your home. A bankruptcy filing brings about an automatic stay in foreclosure proceedings.
This week, federal housing regulators said the government may do more to help at least some homeowners facing foreclosure. The agency that regulates Fannie Mae and Mac may force the two huge companies to reduce the value assigned to principal on mortgages they hold.
Fannie and Freddy are government-sponsored but publicly traded companies that handle mortgage-backed securities.
The Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie, has up to now refused to let them reduce principal on underwater mortgages. Those are mortgages where the mortgage debt exceeds the current value of the house.
But FHFA is under pressure from many members of Congress to change its position. The agency may propose financial incentives to Fanny and Freddie for them to write off debt on homes that have substantially declined in value. Many homeowners, in turn, could potentially obtain forgiveness of at least part of their loans.
If you are underwater on your mortgage, you are no means alone. There are about 11 million other homeowners in the U.S. who owe more on their mortgage loans than their houses are worth.
Source: “Housing regulator to give final say on mortgage aid,” Reuters, 4-3-12