Since 2008, the federal government says it has helped more than 1.1 million homeowners avoid foreclosure with a permanent loan modification. This is a big number but until now not a dime has gone to investors.
The government has adamantly avoided helping real estate investors under the theory that real estate investors are risk-takers who should not get federal assistance. There’s a certain absurdity to this view because all foreclosed homes are a drag on the market. For instance, imagine that there are two foreclosed homes on a single block. They’re both vacant, abandoned and have tall grass and broken windows. They’re eyesores and both equally hold down local home values. It doesn’t matter that one is owned by an investor or that one is owned by a resident.
Now the government is reaching out to investors. The latest variation of the Home Affordable Modification Program (HAMP) essentially says “welcome investors, we’ll help modify your loan.”
Well, okay, there’s no welcome mat but the government does say for the first time that it will help investors facing foreclosure under these conditions:
- You can apply for a modification with a home that is not your primary residence, but the property must be currently rented or you must intend to rent it.
- You obtained your mortgage on or before January 1, 2009.
- You owe up to $729,750 on your primary residence or single unit rental property.
- You owe up to $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property.
- The property has not been condemned.
- An investor must actually be delinquent to qualify for assistance. The standard for owner-occupants is different:They can qualify for help if they have a financial hardship and are either delinquent or in “danger of falling behind” on their mortgage payments.
- You have sufficient, documented income to support a modified payment.
- You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering, or tax evasion, in connection with a mortgage or real estate transaction.
By expanding the definition of distressed properties to include rental real estate huge numbers of additional homes are now eligible for federal assistance. This is good not only for investors, but it’s also good for neighborhoods and communities where investment homes have been just as impacted as every other property.
For additional information speak with your mortgage servicer or contact a HUD counselor.