As the housing market went from boom to bust these last three years, many LGBT homeowners have found themselves desperate and confused, sinking into foreclosure out of defeat. Our community is well-known for gentrifying many forgotten communities; LGBT investors banked on the futures of multiple properties only to find themselves overwhelmed by payments.
“There is hope out there; people need to not give in and throw up their hands,” says attorney Barry Miller of The Law Offices of Barry Miller in Orlando.
“The process is very convoluted,” Miller admits. “Should homeowners modify, should they do a short sale and get out of the investment and into something else?”
When it comes to loan modification, there are basically two processes that can help property owners. You can motivate lenders to lower your original interest rates.
Mortgage lenders can also choose to change the terms of your initial loan—such as modifying 30-year mortgages to 40-year or 50-year plans.
A widespread fallacy that has been floating around the internet is that lenders may forgive or remove some of the principle of the original loan. It’s not true; your initial $300,000 loan will not be lowered to $200,000, even though most property values have plummeted in the last few years after their precipitous rise in the early 2000s.
Even “free” online advocacy groups come with a hitch. A quick investigation into two of these agencies showed that both wanted money upfront in order to “further examine” a homeowner’s circumstances. These websites also prominently featured out-of-state businesses that always charge.
“It’s always best to use local, knowledgeable, and proven people with an array of options,” Miller says.
“There are all kinds of these different programs people can apply for,” says Miller. “The main one is the Make Homes Affordable program (HAMP). It recasts your loan at 31% of your income, including the loan, homeowner’s fees, taxes, and insurance.”
This is a voluntary program, so homeowners can start and still manage their new payments. HAMP also takes into consideration your other debts from college, credit cards and home equity lines of credit. The structure is that—after you’ve been approved for HAMP—you will have a three-month trial payment period. After that, it’s supposed to become a permanent plan.
“The problem with the HAMP program is that there have been about two and a half million applications, and only 200,000 have been approved,” reports Miller.
Chase, GMAC Mortgage and Bank of America have frozen their foreclosure process. Many state leaders have called for an across-the-board freeze of home foreclosures; however, the Federal government doesn’t currently support this. It also doesn’t stop homeowners from finding their own solutions.
“The freezes and the loan modification are two different processes,” Miller says. “People need to understand they have options.”
Sometimes, though, the best choice to get out of debt is to sell your house at a loss. Even that comes with some possible assistance. The HAFA program may waive the difference or deficiency between the short-sale of your home and your initial loan.
Miller concludes: “People just need to understand that they don’t need to roll over—that they have rights.”
