I read in the paper that none of the money earmarked in the bailout is reaching home owners.  Is the government doing anything to help home owners who are having trouble making payments under their mortgages?

Representatives of Federal Housing Finance Agency, Fannie Mae, Freddie Mac and Sallie Mae have officially launched a program called "Streamline Modification" which was developed by those agencies and they claim is making progress to preventing foreclosures.  It is an expedited program that targets troubled borrowers.  To be considered for the program, a seriously delinquent borrower should contact his or her servicer who will try to arrange an affordable monthly mortgage payment.  If the servicer is unable to create an affordable payment with the Streamline program, it will further evaluate the borrower's situation through a customized process intended to help the borrower stay in the borrower's home.  How well it will work is anybody's guess, but at least the thinking seems to be these days that the lender is better off with the borrower in the home making some payments rather than having an empty building. 

It is likely that the government agencies will continue to try and work out  a formula under which a reduced return on a mortgage may result in a bonus payment of some sort when the property is sold.  Their biggest impediment to workouts in the past has been the fact that most of the mortgages were mortgage-backed bonds and you could not adjust one without impacting the rest.  Now that the government owns most of the mortgage-backed bonds, they should be able to control loan modifications with a great deal more success.

If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.