Millions of Americans bought homes during the last few years with loans that offered very low “teaser” adjustable interest rates that have or will adjust to higher rates that the borrower cannot afford. If refinancing is not an option, most likely because the property values have gone down, then what can you do to keep your home from going into foreclosure?
Here is a summary of what lenders and Congress, separately, are doing to try to help.
Lenders plan to help homemakers: The Treasury department and a group of lenders have come up with a “plan.” Keep in mind that this is not law. It is strictly a voluntary participation by lenders.
The “plan” intends to freeze the current mortgage rate for five years. After that the borrower would need to refinance or pay the higher rate as determined by the loan contract. Some of the requirements to qualify for this plan are: The borrower must be no more than 30 days late on the mortgage, the loan must have been taken out between January 2005 and July 2007 and have an initial reset date of January 2008 to July 2010, there must be some equity in the house but no more than 3 percent, the borrower has to demonstrate that he/she cannot afford the new payment and if you want to take advantage of all this, you have to contact the lender 120 days before the interest reset date! Not too many people will be helped by this plan. Maybe option two will help.
Congress voting on bill to change bankruptcy law: Under current bankruptcy law, a loan for a borrower’s home cannot be modified. For other assets, such as a car or investment property, if the value of that asset drops below the loan amount, we can modify that loan so that only the secured portion, up to the value of the collateral, has to be paid. The rest may be discharged in bankruptcy. The bill being considered in Congress will amend the bankruptcy code to allow for the modification of some home loans. This will only apply to the following loans: existing loans made after January 1st, 2000, nontraditional loans and subprime loans only and where there is a notice of foreclosure.
Before deciding if any of these options apply to you, you need to take out your home loan promissory note and deed of trust and read them to determine what your particular situation is.
For a free initial consultation regarding these and other related issues, please contact Susana B. Tolchard, Bankruptcy and Real Estate attorney at 661-287-9986.