How to modify your mortgage to prevent foreclosure.

We been following the ups and downs of the foreclosure prevention business for some time now. See other entries under the Foreclosure category.

Right now (February 2009) the situation looks like this:

The first place to go is the Neighborhood Assistance Corporation of America (NACA) www.naca.com. NACA has made deals with Fannie Mae and several large lenders (and is working on Freddie Mac), to install a streamlined mortgage rewrite program. Here is what they say on their web site.

“NACA provides the most effective solution for owner-occupant homeowners with an unaffordable mortgage who are not investors. NACA is recognized as the most effective in restructuring mortgages by permanently reducing the interest rate and/or mortgage amount to a payment the homeowner can afford. NACA can enforce and achieve these solutions with major lenders/servicers and is advocating against others. Follow the procedures stated below. If you are beginning the process take the first step by attending a workshop now. All of NACA’s services are Free.”

NACA says that they do your budget and figure out how much you can afford. Then they try to get the lender to lower the interest rate or the principle to bring your monthly payments down to something that fits into your budget.

If NACA does not work for you, then wait a minute. It will not be long before Congress passes (and President Obama signs) a new law filed by Representative John Conyers that will allow bankruptcy court judges to do what the lender will not: Reduce the interest rate or principle (or both) until the monthly payments become affordable.

I have long advocated the bankruptcy solution. Right now bankruptcy judges can modify the terms of mortgages on second homes, luxury yachts, investment properties and jets. It makes no sense that they are forbidden from modifying the terms of mortgages on principle residences.

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