Help for Troubled Borrowers

Bush's Hope Now initiative is a voluntary accord entered into by lenders, loan servicers, and mortgage investors to help borrowers who face dafault when their subprice adjustable-rate mortgage resents at a higher rate.

what to do?

1. call the national counseling hotline President Bush publicized. The number is 888-995-4673 (888-995-HOPE) is available on a 24/7 basis.
2. Expect to be on the phone for at least 45 minutes.
3. Expect a counselor to recommend a course of action
4. Servicers are increasingly amenable to be flexible
5. Borrowers are receving fast-track workout plans based on their eligibility

Different Help for Different Borrowers:

1. Owners who are able to stay current even with a rate reset

Solution: counseling and refinancing. Lenders may be able to take these borrowers through a fast track Process ionto a more affordable plan

Potential Pitfall: Prepayment Penalty. Borrowers are encouraged to time their refinancing tp after the rate reset, since penalties often apply only during the initial rate period

2. Owners who face defalt after a rate reset

Solution: Counseling and rate freeze of up to five years. To qualify, they must be ineligible for refinancing (e.g., have a loan-to-value ratio of greater than 97%), occupy the property as a primary residence, and have a credit score of less than 660 that hasn't improved more than 10% since the loan was originated

Potential Pitfall: The rate freeze is temporary; borrowers still need to work out a long term solution

3. Owners already in default

Solution: Counseling and a loss-mitigation strategy, such as a short-sale or deed in lieu of foreclosure. Under the mortgage debt foregiveness law signed by President Bush Dec. 20, borrowers who receive debt foregiveness as part of a loan workout over the next three years won't have to pay federal tax on the forgiven amount.

Potential Pitfall: Those who dont' call in time may not be able to avoid foreclosure