Home loan modification helps couple

MOSES LAKE — After applying and reapplying about 18 times, a Moses Lake couple significantly lowered their mortgage payment through the federal Making Home Affordable Program.

The program is designed to stabilize the nation’s housing market by using a combination of private funds and a $50 billion allocation in federal funds through the Troubled Asset Relief Program (TARP).

The program attempts to address the situation of people owing more on their homes than what they’re worth because of the national housing market decline.

“The (Obama) Administration’s efforts for homeowners have focused on giving responsible households an opportunity to remain in their homes when possible while they get back up on their feet, or to relocate to a more sustainable living situation,” according to the program’s Web site.

The Moses Lake homeowner asked that his name not be printed because he wants to keep his financial affairs private. For this story, the Columbia Basin Herald will refer to them as John and Jane Doe.

But he and his wife want to share their story to let others know there are options other than foreclosure or short sale, in which a lender agrees to the home’s price being reduced for sale.

The biggest challenge for the local couple was the application process, which involved contacting various call centers around the world.

They found call center workers didn’t speak English well, creating a language barrier.

“You get frustrated because of the long holds and many, many times you’ll get turned down. The key is to continue making applications,” John Doe advised. “Once you reach someone who can speak good English and clearly takes an understanding of the challenges you’re having, your chances of having a loan modification go up.”

He advised people to team up with their spouse or a friend. John Doe credits his wife for her work on their application. They found patience and perseverance are key to success.

To qualify, a mortgage payment must be 31 percent or more of one’s gross income, he said.

The results can vary from a semi-modified to a fully-modified loan payment.

Their loan changed from 30 years to 40 years.

The interest rate was lowered to 2 percent, later increasing to 3 percent, 4 percent and 4.5 percent.

Their modified loan remained with the same bank providing the original loan.

“Each lender has the ability to tap into TARP funds from the federal government,” John Doe notes.

It took them six months to go through the program, which starts as an abbreviated plan and moves into a full modification.

“You tweak the system by understanding what makes you a qualified modification homeowner,” he explains. “You need to find the right balance between income and debt.”

There are downfalls to the program.

An April 30 article from the Puget Sound Business Journal implies the program is a short-term fix.

“More than half of all modified loans redefault within six months, despite measures such as income verification and trial modifications,” according to the article.

Only one out of four Washington state residents have received permanent loan modifications and others are still in the initial trial phase to see if they can afford their new payments, the article states.

In many instances, the modification helps reduce the payment, but the homeowner may owe more money than the home is worth, the Moses Lake man says.

“The rationale there, is if you look at it as a rental situation, rather than home ownership,” he says. “The value can’t gain back to its previous levels.”

The program also helps people stay in their homes, avoid foreclosure, and avoid the decline of neighboring home values from a foreclosure or a short sale, he said.

For more information, visit makinghomeaffordable.gov.