Do You Qualify for a Responsible Homeowner Reward Program?

You have probably heard people talk about how there is only financial help for homeowners who have defaulted on their mortgage payments. That has been true ... until now.

With all of the bailouts and financial programs designed to help homeowners who have fallen behind on their mortgage payments, there are many people asking: “Where’s my help?” For years, the government has been focusing on helping people who are several months behind on their mortgage loan payments while many responsible homeowners - also struggling financially - continue to make their payments on time. If you are one of the ones asking where your financial help is, there is some good news.

The Responsible Homeowner Reward program is a new concept in the area of mortgage relief help. According to Time Magazine, it was one of the top innovations in 2010 and it is gaining widespread popularity among homeowners who have made their mortgage payments on time every month regardless of the sacrifices they have to make. While only a small group of mortgage companies are offering reward programs, they are expected by many experts to become more widespread and to eventually affect approximately 20,000 homeowners. Each mortgage company that offers a reward program can design the guidelines and standards based on their individual recommendations. The mortgage companies who are currently participating in this program include GMAC Mortgage and the PMI Group.

According to Frank Pallotta, the managing partner of the Rumson Loan Value Group based in New Jersey, the amount of money given to each responsible homeowner will vary. And they only get the cash reward at an agreed upon time. In most cases, a homeowner will receive a cash payment if they decide to refinance or sell their home. This is one of the ways that some mortgage companies are trying to prevent people from doing a “strategic default,” which occurs when a homeowner decides it is no longer financially feasible to continue making mortgage payments on an underwater home (a home that is now worth much less than the mortgage).

The guidelines of Responsible Homeowner Reward programs do not affect any part of the mortgage, the principal balance or the payments. However, it is a good financial move on the part of the lenders participating in the program because the homeowners have more of an incentive to stay in their home rather than walk away. Those that have taken advantage of the program have been able to refinance their mortgage at a lower rate and they did not need to bring as much money to the table to pay down the original loan amount to qualify for the refinancing.

Since the program is not widespread yet, only a small percentage of borrowers who are underwater on their homes have been invited to participate. In Maryland, for instance, there are more than 300,000 homeowners who are underwater on their mortgages and only about 500 of them have been invited to participate in the program. Pallotta says that part of the reason for the low participation is that borrowers are not aware of the program. As such, he suggests calling your loan servicer to see if they are participating in this program.

Being a responsible homeowner is a tough job so it is important to get any help with your payments whenever possible. If you are current on your mortgage payments but you are struggling to make those payments on time each month, contact your loan servicer to see if they have any options like the Responsible Homeowner Reward program that they can make available to you.

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  • Seth

    February 24, 2012

    How is this different from the $25 billion mortgage settlement? I thought that program was for underwater homeowners who are current with their payments also?

  • Frank

    February 25, 2012

    @Seth: The $25 billion settlement has been assessed on the top 5 banks to be distributed in a number of different way - including principal reduction. There are more than a dozen different way the banks can distribute that penalty from coupon relief, to forgiving arearages and more. Unfortunately, the settlement will only help a scarce few, and once the bank has paid "their due", they will no longer provide relief to underwater homeowners. Finally, with homeowners collectively approaching a $trillion in "negative equity", a portion of $25 billion paid toward that relief will do little to change the trend.

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