Mortgage aids favor Georgians

Georgians could benefit more than people in many other states from new taxpayer-subsidized programs designed to help homeowners at risk of losing their homes.

"Some of these programs may have more of an impact in Georgia than in some other places," said Russell James, a professor in the University of Georgia's department of housing and consumer economics.

Home prices in some parts of the country have fallen so sharply that many owners would be better off financially just to let the bank foreclose on the house than try to keep up payments. But house prices in Georgia have not declined as drastically as prices in many other parts of the country.

Prices in California and Florida slipped by 20 percent from December 2007 through December 2008.

But the decline in Georgia was only 2.7 percent, while in neighboring states such as South Carolina and Alabama, house prices actually edged up a tiny bit, James said.

The programs announced last month and earlier by the Obama administration can help homeowners in two ways, said Scott Scredon, a spokesman for the Consumer Credit Counseling Service of Greater Atlanta.

One program offers subsidies to mortgage lenders that agree to modify borrowers' loans to lower their monthly payments. The subsidy is aimed at an estimated 3 to 4 million homeowners thought to be at risk of losing their homes to foreclosure.

"The Obama administration will pay (lenders) to get payments down to as low as 31 percent of the homeowner's gross monthly income. That's the number that will help most people be able to afford it," Scredon said.

Banks that take bailout money and the giant mortgage-holding corporations Freddie Mac and Fannie Mae are required to participate in that program, but other banks and mortgage companies are not required to participate.

Another program applies only to homeowners with variable-rate loans, and whose mortgages are owned by Freddie Mac or Fannie Mae, Scredon said.

If the homeowner is current on the loan and has made payments on time for the past year, the loan holder can convert the adjustable interest rate on the loan to an affordable fixed-rate loan.

"For the mortgage holder it's a great deal. They're basically able to refinance at a lower mortgage rate, and it allows them to get out of the type of loans that is much riskier than the vanilla fixed-rate mortgage," said Andrew Carswell, a colleague of James in the housing and consumer economics department at UGA.

Even if a homeowner doesn't qualify for either of the federal loan modification programs, lenders are likely to help homeowners hang on to their homes.

"The borrower seems to think the bank wants you to go into foreclosure, which is ridiculous. The idea permeates the mindset of low- to moderate-income buyers," Carswell said.

In fact, mortgage companies and banks stand to lose money when they foreclose.

"A lot of times, especially with (financial problems caused by) one-time medical expenses, mortgage companies are willing to work out plans to work out that difference," Scredon said.

"It makes more sense for you to contact your bank well ahead of time," Carswell said.

The UGA professor also recommends contacting a reputable credit counseling service such as the Consumer Credit Counseling Service.

"They recognize that there's this shame of calling your bank. But if you can get through that hurdle, and call them ahead of time, before you get in trouble, your chances of getting through it improve drastically," he said.

Homeowners who think they could qualify for one of the subsidized loan modification programs can visit the federal Web site www.financialstability.gov for more information, Scredon said.

Scredon also recommended Hope, a new toll-free hotline for homeowners facing closure. The number is (888) 995-HOPE.