A recently released government report has found that the federal Home Affordable Modification Program implemented by the Obama Administration rejects nearly three-quarters of the people that apply to the program. The Home Affordable Modification Program is designed to help homeowners at risk of foreclosure reduce their monthly mortgage payments so they can stay in their homes.
According to Treasury Department data provided to the Special Inspector General for the Troubled Asset Relief Program, 5.7 million homeowners have applied for assistance through the program since it began in 2009. Four million of those applicants have had their HAMP applications rejected.
Once applicants apply for a modification, a mortgage servicer reviews the applicant’s information to see whether they qualify to participate in the program. The homeowner must live in the home in question and have taken the mortgage out before 2009, as well as meet financial guidelines.
If the servicer’s calculation indicates that they will receive more money over time by lowering the applicant’s mortgage payment, the application is supposed to be approved under Treasury guidelines, which mortgage servicers are required to follow. The Treasury Department pays mortgage servicers for each loan they modify.
When the HAMP initiative was announced, $75 billion in funding was earmarked for the program. That amount was later reduced to $29.8 billion. Today, about $18.5 billion remains unspent due to the high rejection rate of applicants.
It was originally estimated that the program would help 3 to 4 million struggling homeowners avoid foreclosure. Only 1.7 million have been able to make use of the program so far.
The high rejection rate has raised questions about whether the eligibility requirements to participate in HAMP are too stringent. The Treasury Department has recently made modifications to the program to make it easier for homeowners to qualify, including reducing documentation requirements and expanding the eligibility criteria.
Some critics of the program also wonder whether mortgage servicers are wrongly denying eligible HAMP applications. The mortgage servicers claim that homeowner income issues are behind the high rejection rate.
However, the report states that the mortgage servicers have made considerable mistakes when recording homeowner income. The report goes on to say that “eligible homeowners may have been, and may continue to be, denied a chance to get into HAMP through no fault of their own.”
This post is a contributed post from USA.gov. See their Financial Self-Defense Kit for advice on how to build financial confidence as well as safeguard your finances.
Managing your finances can be hard. Managing the finances of an older relative or friend can be even harder. You want to honor your loved one’s wishes and respect his or her boundaries, but at the same time you need to act in the person’s best interest. It can be hard to know where to begin or whom to trust. Not only are there legal obligations that come with this responsibility, but the added emotional stress of caring for an older family member or friend can feel overwhelming.
So let’s start with the basics: What is a power of attorney? What does it mean for you, and what should you look out for? Being informed, prepared, and alert will help make a difficult situation as comfortable as possible for all involved.
Be Informed: What Is a Power of Attorney?
A power of attorney is a written document in which one person gives legal authority to another to make decisions about his or her money or property. If you’ve been named to manage money or property for someone else under a power of attorney, you are the fiduciary. It doesn’t matter if you’re managing a small amount of money or a lot, or if you’re a family member or not—you’re now legally responsible for managing that money or property for the benefit of that person, who is known as the principal.
If you were chosen as fiduciary, the principal sees you as a trustworthy, honest, and responsible person. Preparing yourself with the necessary information will help you manage your responsibilities and will bring you, and everyone involved, peace of mind.
Be Prepared: Understanding Your Legal Duties
While a power of attorney can seem like a complex document, there are really just four major duties you have as fiduciary. Your legal responsibilities are to:
- Act only in the principal’s best interest.
- Manage money and property carefully.
- Keep your money and property separate from the principal’s.
- Keep good records.
Because you’re managing someone else’s money, your responsibility is to make decisions that are best for that person. This means managing the money carefully, using good judgment and common sense, and never mixing your assets with the other person’s.
Keeping true and complete records is important; incorrect or incomplete records can get you in trouble—not just with the principal, but also with the police and with government agencies, such as a city’s or state’s Adult Protective Services office.
Be Alert: Protecting Your Loved One From Fraud
Financial exploitation has been called “the crime of the 21st century.” Fraudsters tend to go where the money is, and with over 50 million Americans age 62 and older, older adults are prime targets for financial exploitation.
As a fiduciary, you should know the signs of financial exploitation. Recognizing what to look for will help you protect both yourself and your loved one. Be wary if:
- You or your loved one thinks that money or property is missing.
- Your loved one shows sudden changes in spending and saving behavior.
- Your loved one puts names on bank accounts and property that can’t be explained.
- Your loved one fears a relative, a caregiver, or a friend.
- A relative shows controlling behavior toward you or your loved one.
Even if your loved one controls only some (or none) of his or her funds, he or she can still be exploited. If this person was exploited in the past, before you become involved, there still may be something you can do about it—you can, for example, alert banks and credit card companies or talk to an attorney about preventing future exploitation and recovering the property that was taken.
The truth is, we’re all at risk. Anyone with any money could be targeted by a fraudster at some point. But you can help protect your family and friends by recognizing how fraudsters operate and by reporting scams and suspicious sales pitches.
Check out the Financial Self-Defense Kit from the Federal Citizen Information Center at USA.gov to gather information and build the confidence you need to make smart decisions about your finances and those of the people you care about. The kit includes resources that will help you avoid scams, be an informed fiduciary, and plan for your financial future.
In a recent survey of college pricing, the College Board found that a “moderate” college budget for an in-state public college averaged $23,410 for the 2014–2015 academic year. A moderate budget at a private college averaged $46,272. The high cost of college is resulting in many parents and other family members co-signing for a student loan to help the student get the funding that they need. There are a number of things that you should keep in mind before deciding to co-sign for a student loan.
You May Become Responsible For The Payments
Becoming a co-signer means taking responsibility for the payment of the student loan. If the borrower is unable to make payments on the student loan for any reason, the task falls onto your shoulders. If you do not make the payments, it will be reflected on your credit history, will damage your credit score, and debt collectors may come after you.
Student Loans Cannot Be Discharged In Bankruptcy
There are very few legal options available for getting out from under onerous student loan debt. Bankruptcy laws prohibit the modification of student loans by the court. In some cases, the loan payments can be delayed for a period of time, but the total amount will still be due to the lender once that time period ends.
Being Removed As A Co-Signer Is Difficult
About 90 percent of borrowers who request to have their co-signers released from their obligation are rejected. In many cases, it is difficult to even obtain information about the process for securing a co-signer’s release from a private student loan. Even though private lending companies advertise the ability to release a co-signer from the loan at a later date, review all of the information in the loan documents carefully to ensure there is actually a mechanism in place for removing a co-signer from the loan.
Co-Signer Actions Can Put The Loan In Default
If a co-signer dies or files for bankruptcy protection, there is a chance that the student loan will be automatically placed in default, or become due in full, regardless of the payment history on the loan. Primary borrowers have been surprised to find these types of actions taken against their accounts even though they are current on the payments for the loan. Such “automatic defaults” are common when loans are sold or securitized and are handled by a new servicer.
These difficulties should make you think twice about co-signing for a student loan. Government student loans rarely require a co-signer and have various payment protections in place, so a student should secure as much money in government loans as they can before turning to private loans. Students should also consider attending a college with lower tuition costs if they are having difficulty obtaining student loans on their own without a co-signer.
Budgeting is a very important part of effective financial management. Budgeting requires you to track your spending and hold down your costs. This ensures that you’ll have enough money to cover your needs and still have money to put towards your goals. Many people view budgeting as difficult and time consuming, but you can create a successful budget by following four simple steps.
Allocate 60 Percent Of Income To Fixed Expenses
Ramit Sethi, author of I Will Teach You To Be Rich, recommends in a Lifehacker article that budgeted fixed expenses consume no more than 60 percent of your total income. For budgeting purposes, these fixed expenses include your mortgage or rent payment, your utilities, transportation costs, and debt payments. These expenses are the most important in your budget because they must be paid on a consistent basis to maintain your current quality of life.
Allocate 10 Percent Of Income To Savings
A portion of your income should go towards saving for the future. Unexpected expenses can arise at any time. Having savings available to pay those expenses will help you handle those expenses without having to resort to credit cards or payday loans.
Allocate 10 Percent Of Income To Investments
Saving and investing for retirement should also be high on the list of budgeting priorities. One of the best ways to do this is through an employer-sponsored 401(k) plan. The percentage you choose to invest is taken out of your paycheck on a pre-tax basis and the money grows tax-deferred in the account until it is withdrawn for expenses in retirement.
Remaining 20 Percent Used For Spending Money
After the important needs have been taken care of, the remaining 20 percent of your income can be spent on things that you enjoy. Cable television, movie tickets, dining out, and new clothing are good examples of the things that would fit into this category. Medical insurance and groceries would not, as they are considered fixed expenses.
The beauty of using this formula is that it can be applied to any income level. If your expenses in any one category is less than the recommended percentage of income, the difference can be added to your investments or your savings to boost those accounts. Any additional money you receive in the form of winnings, rebates, bonuses, or raises can be allocated in the same way, with the money for the fixed expenses going into an emergency fund you can tap when necessary.