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Government programs to help homeowners facing foreclosure

Homeowners facing foreclosure, no matter how bleak the options look, aren't quite hopeless yet, due to new government programs to help right regulatory oversight issues with the Home Affordable Modification Program, or HAMP.

In May 2011, the Government Accountability Office said documentation problems from mortgage companies revealed the need for regulatory oversight from government agencies. Since then, the Office of the Comptroller of the Currency, Federal Reserve and the Office of Thrift Supervision have conducted a review of 14 mortgage lenders and identified problems and possible reimbursements for homeowners.

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The government currently has two programs to help the modification crisis - a national foreclosure settlement and an independent foreclosure review. The independent foreclosure review looks at 14 mortgage lenders who may have mishandled a foreclosure through HAMP or for other reasons. To file an independent foreclosure review, the home must be your primary residence and in the foreclosure process at any time between Jan. 1, 2009 and Dec. 31, 2010.

This was created to handle deficiencies found in how 14 of the largest banks handled a government program to assist homeowners for getting out of foreclosure, said Lawrance Evans, the acting director at the GAO.

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A person could be eligible for compensation with an independent foreclosure review many reasons. Some include that the lender didn't properly follow the guidelines for HAMP, or the person requested assistance or modification, submitted complete documents on time and the foreclosure sale still occurred. Being charged bogus fees or penalties, or inaccurate mortgage payments can also result in compensation.

ProPublica has a full list of reasons why a person may be eligible to receive compensation at http://bit.ly/RFL3P3.

"One of the problems that concerns us is that people were inaccurately denied home modifications and were told documents were missing, or weren't offered the modification," Evans said.

Evans said the review from GAO is two-fold. An estimated 4.3 million homeowners are eligible to apply for the independent foreclosure review until Dec. 31. The government is also doing a study where it looks through the services of the banks to find errors, Evans said.

The banks pay for the independent contractors and the sum of money, which can be up to $125,000 plus equity, or as low as $1,000, depending on the error, Evans said.

The national foreclosure settlement is slightly more limiting in that the home must be foreclosed upon, and fewer banks are participating in the settlement. Similar to the independent foreclosure review, the home should have been the primary residence.

If the home was lost due to financial hardship, or the person was improperly foreclosed upon, the person may be eligible to receive a piece of a $25 billion deal reached between the government and the banks. The deadline for the national foreclosure settlement is Jan. 18, 2013.

Options for homeowners facing foreclosure

For those who haven't lost their home yet, foreclosure isn't the only option, said Gwenn Bockelmann, a Westminster real estate agent who is considered a Certified Distressed Property Expert. Bockelmann received her certification about six months ago, but has specialized in short sales for more than three years, she said.

Short sales typically occur when homeowners owe more than what their house will sell for, she said.

"It's one of those solutions that has been around for many, many years, but it seems in the last five years, it's been the one solution for many, many, many people," Bockelmann said.

While the housing market is seeing marginal improvements, Carroll County saw 38 new foreclosures in October. The highest number of foreclosures in the last month were in Taneytown, according to RealtyTrac. Approximately one in 695 homes file for foreclosure in Taneytown, according to RealtyTrac.

For those who are facing foreclosure, Bockelmann said the lender can still hold the homeowner accountable for a deficiency judgment, which is when the house sells for less than what the homeowner owes.

In short sales, that amount can be negotiated or even disappear, Bockelmann said. A short sale will also help with the amount of time homeowners can purchase another home and will do less harm to a homeowner's credit score than a foreclosure, she said.

As of Friday, around 15 percent of homes on the market in Carroll County were considered potential short sales, foreclosures or bank owned properties, according to data from Metropolitan Regional Information Systems.

Bockelmann and a housing counselor from Consumer Credit Counseling Services, Matt Gregory, said to be aware of scams in the housing market right now.

It is illegal in the state to charge for a modification, Gregory said.

"No one can grant a modification except for the mortgage company. The paperwork is all the same [regardless of who files it]," Gregory said.

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