Not long ago a Baxter couple struggling to make their house payments contacted their mortgage servicer only to find help would only be offered after they defaulted on the loan.
A new government plan is aimed at helping homeowners before they fall over that cliff. Area lenders received details of the Homeowner Affordability and Stability Plan this week.
The plan, announced by President Obama's administration, is expected to help up to 9 million families restructure or refinance their mortgages to avoid foreclosure.
Becky Eckelman, who works in mortgage and commercial lending at Brainerd Savings & Loan, said the plan offers financial incentives to mortgage servicers and homeowners to help people stay in their homes.
There is little doubt the prospect of losing a home can be paralyzing but lenders agree homeowners need to take a proactive step by reaching out first to their mortgage servicer. Homeowners do not need an intermediary to contact lenders to make their case for hardship.
Becky Eckelman, who works with mortgage and commercial lending at Brainerd Savings and Loan, said amid all the difficult economic news there is a bright spot that hasn't been widely talked about - the $8,000 tax credit for first-time homebuyers who purchase a home between Jan. 1 and Dec. 1, 2009.
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"My advice is always make the contacts before you are over the edge - the sooner the better," said Jim Kraft, Northern National Bank Baxter branch president. "There are steps you can take. The banks in this area for the most part want to help everybody through. The banks never want to be the owners of collateral - that's a last resort."
With an early review of the government's newly unveileded homeowner plan, Kraft said there are some good things involved such as refinancing options without new appraisals - a boost for people because of diminished real estate values.
When calling a mortgage servicer, Eckelman said people need to be persistent and keep pressing zero on the phone until they get through the pre-recorded messages to a live person.
Eckelman has more than 25 years experience in mortgage lending, real estate, sales and marketing. "Nobody wants to take a house back," she said, noting the flexibility small local banks have to help clients and the new plans that basically allow people to customize restructuring.
In a restructuring, a homeowner a couple of months behind in mortgage payments may be able to reduce their 6 percent interest rate to 4 percent for 38 years, allowing them to be able to afford the monthly payments.
"Each one is going to be different," Eckelman said. But Kraft said restructuring only works if there is cash flow to service the new plan.
Jim Kraft, Northern National Bank Baxter branch president, remained optimistic about the economic forecast for the Brainerd lakes area. Kraft said there are new options for homeowners concerned about foreclosures and people shouldn't wait until they are in default to talk to their lenders.
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Beyond the options to keep responsible homeowners from foreclosure, Eckelman said she is most enthusiastic about the $8,000 tax credit available this year to new homebuyers, identified as someone who hasn't owned a home in three years.
"That's the silver lining in all of this," she said. "This is really the news that will hopefully help jump start things."
She said the tax credit may help a couple build a garage or buy a washer and dryer - stimulating the economy.
"This is going to be a big deal," she said. "It will help a lot of people who are struggling. This should be headline news."
And if people have a stable income and good credit, there continue to be loans available that do not require 20 percent down. Interest rates are low and the housing inventory is high. But Kraft said people looking to buy at a bargain must recognize they have to sell their existing home at a bargain too.
"You can't buy wholesale and sell retail," Kraft said.
In banking for 30 years and in the lakes area for 20 years, Kraft said he's witnessed economic cycles but never this major of a turn where so many business sectors are affected. But he's generally optimistic.
"We know it will turn," he said of the economy. "It's a matter of when it will turn."'
RENEE RICHARDSON may be reached at email@example.com or 855-5852.
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