Mortgage giants launch streamlined plan to help troubled owners
Hundreds of thousands of owners who are behind on their mortgage can now qualify for an automatic reduction in their payments — without providing tons of financial information and other paperwork.
Q. We are behind on our mortgage payments and have heard that the government has launched another program to help owners like us. Do you know anything about it?
A. Yes. Called the Streamlined Modification Initiative, it was launched earlier this month and is expected to help hundreds of thousands of homeowners across the nation whose loans are owned by financial giants Fannie Mae or Freddie Mac.
Fannie and Freddie don’t make loans directly to borrowers. They instead buy mortgages that are made by independent lenders, a process that gives those banks the cash they need to finance even more transactions.
Many homeowners don’t even know if their loans are owned by Fannie or Freddie because they are required to send their monthly payments to the lender itself. Your bank’s customer-service department probably can tell you if either of the two own your mortgage, or you can contact the pair at the phone numbers listed below.
An important benefit of the new program is that it requires virtually no paperwork. That’s a departure from most other government-backed save-your-home plans, which require reams of financial documentation and other paperwork that take countless hours to gather, complete and process.
To be eligible for the new Streamlined Modification Initiative, you must be at least 90 days behind on your mortgage payments but can be no more than 24 months behind. The loan itself must be at least one year old, and its outstanding balance must be equal to 80 percent or more of the value of your home.
Most lenders will lower an eligible borrower’s monthly payment by stretching out the length of the loan, lowering the interest rate or both. An example provided by the agency that oversees Fannie and Freddie states that a borrower whose repayment term for a $200,000 loan is lengthened to 40 years from 30 and whose rate is cut from 5.5 percent to 4 percent would cut the monthly payment to $835 from $1,135 — a reduction of exactly $300.
Once you’ve made the lower payments in a timely fashion for three consecutive months, the modification becomes permanent.
Many lenders have already begun sending out letters or calling eligible borrowers to explain the new program. You can contact Fannie Mae at (800) 732-6643 (www.fanniemae.com) and Freddie Mac at (888) 995-4673 (freddiemac.com) directly to see if one of them owns your mortgage and get details about their other programs to help financially troubled borrowers.
Q. I am buying my first home. The lender insists that I get a property-tax “escrow account,” so I will pay one-twelfth of my estimated annual property-tax bill into the account each month and the bank will use the money to pay the bill when it comes due. Will I still be able to deduct the amount of the bill on my next tax return, even though the bank will be issuing the check using my own money?
A. Yes, you will be able to fully deduct the property taxes you pay, even though the bank will tap your escrow account to actually write the check (or electronically transfer the funds) to the county tax collector.
The bank will send you an IRS Form 1098 next January that details how much you paid in property taxes, mortgage-interest charges and the like during 2013. You then simply enter those figures on Schedule A, Itemized Deductions, and include it with your federal Form 1040 return.
Q. We visited an open house last weekend and really liked the home. When we asked the seller’s agent if anyone had made an offer on it, he replied that he represented only the seller and therefore could not legally disclose such information about the property. Is this true?
A. This agent might need to brush up a bit on real estate law. Though the agent or seller doesn’t have to tell you if any offers have been made, there’s nothing in the law that prevents either one from doing so.
Some seller’s agents I know are happy to let potential buyers know whether other offers have been made, and sometimes even why the seller rejected them. Such information can help the buyer craft a new offer that could be more appealing, help the seller end the marketing process sooner — and let the agent collect the sales commission quicker.
Real estate fact: About 33 percent all U.S. homeowners are “mortgage-free,” the Census Bureau says, down from 55 percent in 1940.
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© 2013, Cowles Syndicate Inc.