New Government Website Helps Troubled Homeowners

The Obama Administration is supporting its Making Home Affordable initiative with a website that offers guidance and advice to troubled homeowners.

A Google or Facebook search reveals dozens of businesses pitching loan modification services. But troubled homeowners still don't know who to trust or where to turn for help. Thankfully, there's a new website bringing trustworthy advice to homeowners from a reliable source-the federal government.

Overcoming barriers with the web

Here's a site to bookmark, particularly if you know someone you'd describe as a troubled homeowner: MakingHomeAffordable.gov. The Obama Administration has set up the site to give homeowners reliable advice about whether they qualify for new federal loan modification and refinance programs.

Troubled homeowners don't often know how to get help. They may have difficulty reaching a decision-maker at their loan servicing company, or they may be worried about getting caught in a loan modification scam. Unfortunately, when it comes to mortgage defaults, waiting to take action usually causes more problems than it solves.

Nonprofit groups like the Neighborhood Assistance Corporation of America have addressed the issue with outreach programs involving outbound phone calls and public events. The new Making Home Affordable website will complement these initiatives. It gives homeowners a means of confidentially checking their eligibility for two federal programs: Home Affordable Refinancing and Home Affordable Modification.

Loan modification guidance

Troubled homeowners can navigate to the site's Eligibility page to begin researching their options. People who've already defaulted should use the modification eligibility form; those who are still current, but struggling, may qualify under the refinancing program.

Home Affordable Modification. Eligibility is assessed from the homeowner's responses to five yes-or-no questions. The most difficult one is whether the mortgage payment is more than 31 percent of the borrower's gross income. A specialized calculator is provided to assist in answering this query. 

Home Affordable Refinancing. Answers to just a few yes-or-no questions are required. The homeowner will be asked if Fannie Mae or Freddie Mac owns or guarantees the mortgage. For those who aren't sure, links are provided to Fannie's and Freddie's online loan lookup tools.

Potential problems

A list of "next steps" is provided to homeowners who are likely to be eligible for one of the two federal programs. They involve compiling income and asset documentation, and then contacting the loan servicer.

To date, servicers haven't handled loan modification requests consistently. The Making Home Affordable program seeks to overcome this challenge by requiring that servicers modify all eligible mortgages. The legality of this directive, however, has been challenged by mortgage investors. Servicers are asking Congress for a safe harbor provision, which would prevent them from getting sued by investors for modifying loans. Ultimately, the nagging uncertainty regarding servicers' authority to modify loans may continue to work against troubled homeowners, even when the new website confirms that the homeowner may be eligible for the loan modification program.