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Susan Templeton
Susan Templeton
Washington Federal Assistant Manager
Bellingham, Washington
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HOPE for Entrepreneurs: Obama Rescue Plan

HOPE is on the way from the Obama Stimulus Plan for Small Business Entrepreneurs. You may qualify for new government funding. If you are just needing to ease the pain of a high home mortgage payment, here's how
Written Mar 27, 2009, read 1545 times since then.

 

Gone are the days of refinancing your house or taking out a second line of credit to run your business. The reduction of available credit has caught many an entrepreneur off guard.

Please know you are not alone! Many, many good people who have never missed a mortgage or card payment in their lives are facing loss of business income. If you have an Adjustable Rate Home Mortgage, a combination of loans or a second with a baloon that you just can't afford, your ARM mortgage is adjusting soon, you lost your renters in you investment property, a member of your family lost their job, or you have missed mortgage payments --help is available. 

Lenders are increasingly motivated to negotiate new terms with the goal of keeping you in your home. They do NOT want your home. They want a performing loan.

Several 'loan workout' options exist: including but not limited to: reinstatement, forbearance or a new repayment plan to suit your situation. When you call your lender directly ask for a supervisor and see first of all if they are willing to talk seriously about your case. You don't have to be in arrears to be taken seriously.

FHA Rescue and Secure Plans these programs, introduced in 2008 have been deemed practically useless based on the extremely high risked based pricing and full documentation required. If you are already behind on payments you may not have much choice due to how the lenders see your 'risk factors'.

Officially the FHA has has no minimum FICO score but the banks who fund FHA loans have strict lender overlays and very few will fund under 620 FICO score these days. Unfortunately, with guidelines tightening on all fronts not everone will qualify for FHA versions, especially not self employed persons who adjust their gross income and take advantage of business deductions.

Short Refis: An unusual situation is evolving for some unlucky borrowers whose homes are worth less than their mortgage. In some cases, the lenders may have gone under and their loans are being re-sold at a dramatic loss to new banks. The buyers of these loans can offer loan reductions because they are buying discounted loans. It's up to the individual to negotiate or hire an attorney to get their loan reduced and in some cases it's done by refinancing the loan to a different lender so the current holder of the note gets what they need to profit and walk away. What you have to 'know' is what your current lender actually paid for your loan...very hard to know. In some cases the lender is offering a refinance during the transition to a new lender as an incentive to free up their capital. The only explanation I can offer on this is that there must be some pretty serious oversight by regulators for consumers to benefit in this way!

Mortgage Modification For longer term issues impacting your ability to afford your current mortgage, you are advised to pursue mortgage modification with your current lender. Mortgage modification may help by adding missed payments to your current loan balance while adjusting the adjustable rate to a fixed rate. This may be accomplished by extending the number of years on your loan our ust lowering the interest rate, thereby lowering the payment within your means.

Mortgage Insurance Loan: If your mortgage is insured (via Mortgage Insurance) you may qualify for a one-time interest-free loan from your MI guarantor to bring your account current and pay it back within a certain time frame. Your lender handles this process since they are essentially the insured party.

NEXT: Loan Modification Resources: There are many companies out there who will help you work with your lender to modify your loan for a fee. These are legal negotiators whose fees range from $1000 to $4,000 or more. Your success depends on your circumstances and you ability to negotiate effectively with lenders. Modifiers are professionals who have the inside story with lenders.

In Washington State, our DFI and the State Attorney General have proposed new rulings that only Licensed Loan Originators and Brokers or Banks themselves can offer this service to protect consumers. You should not have to pay more than $500-1000 up front. If they don't get an acceptable result, you should get your money back less an application fee of around $300.

Our Washington State Attorney General is keeping close tabs on this: ask if the company is licensed and bonded, and if the advisor is a licensed loan originator or broker or attorney.

Private Options: I've spoken with several private lenders about options to refinance folks out of difficulty.... but they are very strict on minimum 600 FICO Scores in this market. Most private lenders want hefty fees up front and interest rates starting at 10% for higher risk loans. Since some ARM loans are already adjusting higher than that, a private lender could be a very decent option if you are in too deep to have your loan modified.

Non Profit Counseling Hotline: For borrowers in arrears or nearing a rate reset they know they cannot afford, call Hope Alliance's hotline. Hope Alliance is a non profit HUD sponsored counseling organization who will help you determine the parameters of your situation. After which , they will petition your existing lender on your behalf. The lender will then respond directly to you, after which you are on your own to negotiate your interest rate down.

FREE HOTLINE: Hope Alliance 800 449 9392 www.995hope.org

BUT FIRST If you are not sure how to proceed, the first step is to ask your lender directly about potentially working out a solution. Here's a link to the Treasury release on the Fannie/Freddie programs and how they work.

3/4/09 U.S.Treasury Summary of the new program: Making Home Affordable
http://www.treas.gov/press/releases/reports/guidelines_summary.pdf

Whichever way you decide to go, plan on time and patience being essential. And remember: the person you are dealing with at the bank is a human being and they also deserve your respect.

All the best! Loannetter

Learn more about the author, Susan Templeton.

Comment on this article

  • Life, Prosperity, and Small Business Coach. Author. Speaker. Trainer. Singer/Songwriter. 
Seattle, Washington 
Kate Phillips
    Posted by Kate Phillips, Seattle, Washington | Mar 30, 2009

    Thanks for covering an important subject, Susan! I'm writing a bit about mortgages in my upcoming Overcoming Financial Stress ebook, and you are right, there are many options for homeowners. Thanks for giving us some great resources.

    Kate

  • Washington Federal Assistant Manager 
Bellingham, Washington 
Susan Templeton
    Posted by Susan Templeton, Bellingham, Washington | Mar 31, 2009

    Thanks for your interest, Kate! While the new guidelines spell out how mortgage servicers (banks and brokers) can can offer these Stimulus Refis to help homeowners and entrepreneurs... they also present a host of new challenges and unanswered questions. Our lending partners are rolling out their programs this week. Not all business owners who hold seconds on their homes will qualify for these programs if their home values have dropped significantly so modification is on the cards for many.

    Hint: first in first served!

  • Leadership Consultant 
Khobar, Eastern Saudi Arabia 
Evan Glassett
    Posted by Evan Glassett, Khobar, Eastern Saudi Arabia | Apr 02, 2009

    Susan-

    Great information in a very simple way. Thanks for posting this article.

  • Washington Federal Assistant Manager 
Bellingham, Washington 
Susan Templeton
    Posted by Susan Templeton, Bellingham, Washington | Apr 17, 2009

    Hey Evan, thanks for the compliment. Sometimes these complex situations just take a bit of boiling down.

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Article tags

  • entreprenuer finance
  • credit reduction
  • loan modificaton
  • sba

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