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.

Considering remortgaging?  Check out rates here.

Five Advantages of Choosing a 15-Year Fixed Rate Mortgage Over a 30-Year Mortgage

A 15-year fixed rate mortgage is preferred by many mortgage advisors and home buyers. What are some of the benefits of this type of mortgage and why is it becoming more and more popular for today's home buyer?

With all of the options available to you as a home buyer, choosing the right type of mortgage may seem overwhelming. You can choose from fixed rate mortgages, adjustable rate mortgages, mortgages in which you only pay interest for several years, and several other options. So how do you decide which one to choose? If you are trying to decide, here are some advantages of choosing a 15-year fixed rate mortgage to help you with your decision.

1. A 15-year fixed rate mortgage means paying less interest over the course of the loan.

When you pay your monthly mortgage payment, there is always going to be a significant amount of your money that goes to pay the interest. The longer your mortgage term is, the more interest you are going to pay over the life of the loan. Assuming a straightline amortization schedule and the same loan amount, you will pay less than half of the overall interest over the life of a 15-year fixed rate mortgage than on a 30-year fixed rate mortgage.

2. A 15-year fixed rate mortgage means getting out of debt faster.

Many financial experts suggest doing a 15-year fixed rate mortgage because it will help you get out of debt faster. Experts like Dave Ramsey suggest that you put at least 20 percent down on the home and he also says that your mortgage payment should be no more than 25 percent of your take home pay each month. While the monthly mortgage payments on a 15-year fixed rate loan would be a little higher than on a 30-year mortgage loan, that increase is due to faster amortization (i.e., faster pay down of the loan amount) and you will be out from underneath your mortgage debt in half the time which can be liberating, both financially and psychologically.

3.  Rates on a 15 Year Fixed Rate Mortgage are ordinarily Lower than on a 30 Year Fixed Rate Mortgage

While rates on 30 year fixed rate mortgages are at historically low levels, in most parts of the country rates of 15 year fixed rate mortgages are as much as 50 basis points lower.

4. You Are Unlikely to Live in Your Home More than 15 Years

Many home buyers believe that it makes sense to lock in to today’s historically low rates for the longest period possible and therefore believe that they should choose the longest term possible.  Such a strategy ignores the reality that very few home buyers will live in their home more than 15 years. When you sell your home, you will be paying off your mortgage.

5. A 15-year fixed rate mortgage loan instills discipline.

You might be asking yourself, “Why can’t I just get a 30-year fixed rate mortgage loan and pay it off in 15 years?” That might sound like a good idea, but the fact is that more than 97 percent of home buyers lack the discipline that it takes to do that and they never make any extra payments after the first few months of their mortgage. When something comes up during the month, it’s very easy to simply forego the extra payment for the mortgage and put the money towards something else. But signing up for a 15-year fixed rate mortgage forces you to discipline yourself and budget your money accordingly so you actually pay off your house in 15 years instead of 30. Besides, even if you sign up for a 30-year fixed rate mortgage and you pay it off in 15 years, you might be paying a higher rate than if you had just signed up for the 15-year fixed rate mortgage (see point 3 above).

 A 15-year fixed rate mortgage has both financial and psychological benefits over a 30-year fixed rate mortgage. If it is a possibility for your budget and your financial situation, it may be your best option. Crunch some numbers and work with a qualified financial consultant to make sure a 15-year fixed rate mortgage is ideal for you.

Have a look at 15 year fixed rate mortgage rates where you live here.

Military Members to Receive Mortgage Relief

Several major mortgage lenders violated the law several months ago and performed wrongful foreclosures on many active duty service members. Now a lawsuit has provided help for these victimized military members and their families.

There was a story not very long ago that reported that members of the military were losing their homes to unfair foreclosures. If you were one of the service members affected by this or if you know a military member who had their home foreclosed on unfairly, there is some great news.

As a result of the lawsuits filed over this matter, four of the main lenders in this debacle have vowed to make amends with the military service members who were unduly foreclosed upon and those who were denied a reduction in their interest rates despite the law that is designed to protect active duty military personnel from mortgage and credit abuses while they are deployed. The four major banks that were involved in this were Wells Fargo, Citigroup, Ally Financial and JPMorgan Chase. In order to make amends for these abuses, the four lenders have agreed on a comprehensive settlement which includes the following terms:

  • Ally Financial, Wells Fargo and Citigroup will have to pay any service member that had a wrongful foreclosure at least $116,785 in addition to any interest and lost equity that occurred on their home. In some cases, the banking regulators may require them to pay out more depending on each individual case.
  • JPMorgan Chase has already compensated some of the military service members who were affected by wrongful foreclosures and those who were denied lower interest rates due to a previous settlement. Chase will also provide these service members either the full cash equivalent of their home at the time when they were wrongfully foreclosed or give them their home free and clear if they are still living in it. In addition to that, many of the service members affected by Chase’s violations will receive additional compensation for additional harm that they  may have suffered.

According to Tom Perez, the assistant attorney general for the Justice Department’s civil rights division, the Servicemembers Civil Relief Act is designed to reduce the burden of consumer debt obligations for our active duty military personnel so they can devote their full attention to their military responsibilities instead of worrying about the adverse financial consequences to their families. It is supposed to prevent foreclosure and other consequences so these wrongful foreclosures and resistance to reducing their mortgage interest rates are violating the law. The settlement in the recent class action lawsuit expands the protection by covering troops who are deployed regardless of when they took out their mortgage (before or after enlisting in the military) and it also provides relief for military members’ families who have underwater mortgages and are also relocating due to new military assignments.

If you are unsure if you qualify for mortgage relief help and you are a service member, you can find more information at www.servicemembers.gov. You can also find information by contacting your Armed Forces Legal Assistance office or call the United States Justice Department at 800-896-7743.