• Foreclosure counseling can make a difference
     | July 28,2013

    Getting help before it’s too late can be the difference between whether homeowners keep their homes or lose them to foreclosure.

    NeighborWorks of Western Vermont is one of five homeownership centers in the state that offer services ranging from home-buyer education classes and home improvement loans to foreclosure intervention.

    “In the foreclosure workshops that I do, I always recommend that they keep in touch with their lender,” said Nancy Gilman, a NeighborWorks foreclosure counselor.

    Gilman said if someone is pursuing a mortgage modification it’s always a good idea, given the complexity involved, to enlist the help of a housing counselor.

    According to NeighborWorks, a recent study by the Urban Institute found that homeowners who worked with a counselor were a third more likely to keep their homes with favorable mortgage modifications.

    Gilman has had a few successes along with more than her share of frustrations.

    She said one case involved a loan modification for a disabled veteran and his wife who owed $370,067 on their mortgage, including past-due payments, escrow and miscellaneous fees not including late fees.

    Gilman said the loan modification, which took a year to complete, reduced the interest rate from 7.87 percent to a step rate of 2 percent for five years.

    The rate then went up 1 percent a year until it reached 4.5 percent for the life of the loan.

    She said all late fees were waived and if the couple stayed current for three years the bank agreed to forgive $110,067 in delinquent interest and escrow, along with servicing fees. The end result was a reduced mortgage of $260,000.

    In addition, every year for five years that the borrower stayed current with the mortgage payment, the bank would further reduce the principal under the federal Home Affordable Modification program, or HAMP, by $1,000 a year for an additional savings of $5,000.

    In another case, Specialized Loan Servicing (formally serviced by Bank of America) offered a trial loan modification to one of Gilman’s clients. The modification would have reduced the principal by $2,395 but required a higher mortgage payment of $1,016.64 a month.

    According to Gilman, the agreement also would have required the homeowner to give up the right to apply for any other modification program, including HAMP.

    Gilman advised the homeowner to reject the offer. “His original payment was only a little over $700 and he couldn’t make that,” she said. “So how could he make over $1,000?”

    Under the terms of the offer, if the homeowner applied for and did not qualify for HAMP, the mortgage company said it would withdraw its modification offer.

    Gilman had the client apply for a modification under HAMP, which was approved with more favorable terms.

    She said the payment was reduced to $593, saving the homeowner $423.67 a month compared to the mortgage-settlement modification offered by Specialized Loan Servicing.

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