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Short Sales, Foreclosures, and the Mismanagement of the Making Home Affordable Program?

In an effort to curb the rate of home foreclosures and mortgage defaults the White House initiated the Making Home Affordable Program (MHA) in 2009 to provide home owners with alternatives to foreclosure or filing Chapter 7 and Chapter 13 bankruptcy. Through the MHA program homeowners can take advantage of lower mortgage interest rates, reduction in monthly mortgage payments, temporary suspension of mortgage payment obligations during periods of unemployment, and short sales of homes without being responsible for the difference between the mortgage lien and market value of the home.

Although the MHA program has been improved since its inception to allow unemployed homeowners of FHA insured loans to miss up to 12 months of payments as those borrowers look for jobs, only 10% of the 50 million mortgage loans outstanding nationwide are banked by the FHA. Other possible hindrances to the applicability of the MHA program are screenings for employment and payment history. To date, 550,000 of the 3 to 4 million foreclosures have been modified through the MHA program nationwide.

The largest obstacle to successful modification or short sale through the Making Home Affordable Program are the loan servicers themselves. Although the program grants servicers a $1,000 payment for each modification, most program enrollees haven't received permanent modifications at the end of the 3 month trial period, leaving them returning to their original unaffordable mortgage interest rate and payment. This is largely caused by the lack of penalty imposed by the federal government when a modification is unsuccessful. Loan Servicers operating under the MHA have been guilty of repeatedly loosing borrower paperwork, failing to follow program standards, and unnecessarily delaying the loan process. Some jurisdictions have reported only a third of their loans permanently being modified. In sum, the benefit afforded to home owners availing themselves to the MHA program has been great when successfully completed. The larger problem rest not with the intent but the execution of the program.

MHA options include:

· Home Affordable Modification Program SM (HAMPSM)

· Principal Reduction Alternative SM (PRA)

· Second Lien Modification Program (2MP)

· FHA Home Affordable Modification Program (FHA-HAMP)

· USDA's Special Loan Servicing

· Veteran's Affairs Home Affordable Modification (VA-HAMP)

· Home Affordable Foreclosure Alternatives Program (HAFA)

· Second Lien Modification Program for Federal Housing Administration Loans (FHA-2LP)

· Home Affordable Modification Program for Rural Development Loans (RD-HAMP)

· Home Affordable Refinance Program (HARP)

· FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance)

· Home Affordable Unemployment Program (UP)

· Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF)

If you have attempted one of these programs and it has been unsuccessful, you can still achieve many of these same results through the bankruptcy process with modifications of interest rates, payments, and loan terms. Consultations with a Douglas County Bankruptcy Lawyer involve not only a detailed discussion of the Chapter 7 and Chapter 13 Bankruptcy process but also alternatives to filing bankruptcy.


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