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Deciding to become a landlord can be daunting for all who take the plunge, but for those who did so out of necessity when the economy tanked, help may be a click away.
Harvard’s Joint Center for Housing Studies conducted a survey of housing units during the economic downfall and found that from 2007-2011, approximately 2.3 million single-family homes went from being owner-occupied to rental properties.
For many homeowners, becoming a landlord became a necessity, rather than a method of investment. Whether leasing out part of their home to help pay the bills, or being forced to move and unable to sell the prior residence, the economic downturn and its aftermath created plenty of accidental landlords. Many of these reluctant landlord-homeowners were left wondering just how much notice was required to ask intractable tenants to vacate, or just how many violation notices it would take for them to begin abiding by the rules.
Regardless of their specific experience, some of these accidental landlords found themselves wishing for an alternative, despite being unable to sell given the home values in their neighborhood. In 2011, homeowners in some parts of the country started seeing relief in the form of slowly rising housing prices, enabling them to once again consider placing their homes on the market for sale. In areas where housing prices remained low, would-be sellers have had to wait, hoping that better days would come in perhaps just another year or two.
Fortunately, the U.S. government granted homeowner’s wishes in the form of the Making Home Affordable Program. Originally introduced in 2009, the Making Home Affordable Program provides homeowners with the opportunity to refinance their existing mortgage at today’s incredibly low rates, and offers them more reasonable terms than some of their current loans. The original program was designed to offer relief to homeowners for a specified period however, since that time the government has extended the application deadline for the program to December 2015, affording millions of homeowners the opportunity to obtain the help they may still need.
The government has made provisions for just about every situation imaginable for homeowners who find themselves unable to pay their current mortgages, even those homeowners who may no longer wish to own their homes at all. Although most of the programs were initially designed for owner-occupants, the modification program (HAMP) has been revised to include non-occupant owners. Landlords who rent space in their homes or who live in a multi-unit dwelling and lease out the other unit(s) are able to take advantage of all of the programs.
The following are individual programs designed to address specific homeowner needs under the Making Homes Affordable Program.
Homes Affordable Refinance Program (HARP)The HARP program assists homeowners in refinancing their current Freddie Mac or Fannie Mae loans, including homeowners who are upside-down. The program was originally being offered to those whose existing loan had a loan-to-value ratio (LTV) of more than 80%. Since its inception, the program has changed to include owners with an existing LTV up to 125%. To be eligible however homeowner’s must be current on their mortgage and meet certain other criteria. More HARP details here.
Home Affordable Modification Program (HAMP) – The HAMP program grants loan modifications to homeowners struggling to pay their mortgages. The program was initially limited to owner-occupied homes, but has since been revamped to include homes which owners have already or are planning to place on the rental market. The program’s goal is to lower mortgages to no more than 31% of gross annual income. The FHA, VA and USDA all have modification programs to help homeowners. More information on the HAMP program can be found here.
Principal Reduction Alternative Program (PRA) – This program was implemented to help homeowners reduce the amount owed on their existing loan. The government encourages investors and mortgage servicers to lower the loan amounts for owner-occupants who are upside down and who have loans not secured by Freddie Mac and Fannie Mae. For details on the PRA program, click here.
Second Lien Modification Program (2MP) – This program is for those owners who may have second mortgages, HELOCS or other secondary liens on the property, that are creating a financial burden. View more information on this program here.
Home Affordable Unemployment Program (UP)- Designed for those who find themselves unemployed, homeowners may be allowed up to 12 months of completely suspended mortgage payments or significantly reduced payments (up to 31% of their income).
Home Affordable Foreclosure Alternatives (HAFA) –This program is unique in that it addresses the needs of those homeowners who do not want to save their homes. It offers an alternative to an outright foreclosure by allowing an owner to sell the home for less than what is owed (short sale), or to return the title of the home back to the bank, also known as a deed in lieu of foreclosure (DIL).
Homeowners and live-in landlords who are less than enthusiastic about renting out their prior homes or space in their current homes as a strategic plan towards their own economic recovery may find these programs helpful. There are also several other lesser-known programs which can all be found here.
Are you a reluctant landlord ready to bail out? Have you taken advantage of any of the programs mentioned here?
