Lots of anticipation has built up in recent months regarding the foreclosure prevention plan recently unveiled by President Obama. Scores of troubled borrowers have flooded mortgage servicers in an effort to receive the promised help, only to find mixed results. Read on for some exposure to the high expectations of the plan as well as real-world insight into how the plan is actually helping – or in some cases, hindering – troubled homeowners, along with how to make sure the plan works for you.

The low-down on the foreclosure prevention plan

In an effort to curb the tide of foreclosures sweeping the country over the last year, the Obama administration recently unveiled a foreclosure prevention plan to aid homeowners. The plan was to allow homeowners with little or no equity in their homes to refinance, meaning they could take advantage of the low rates available today.

A large bonus of the plan is that it waives the requirement that homeowners have a minimum of 20% equity in their homes. In fact, homeowners are allowed to participate in the plan even if their loans exceed 100% of the value of their homes (loans may go up to 105% of the value of the property). The only catch is that other criteria must be met.

The purpose of the plan was to aid homeowners who have responsibly stayed current on their payments but who have seen their homes decline in value.  Another goal of the plan was to help borrowers who are at risk of default or who have already defaulted on their loans to lower their monthly payments.

The cap for lowering monthly payments was to be no more than 31% of a homeowner’s pre-tax income. Such a move would help those who are making lower wages at their jobs than usual, as well as those who are no longer in a position to handle monthly payments.

Mixed experiences have prevailed

Like all plans, the foreclosure prevention plan is only as good as the service professionals responsible for implementing it. Because of the professionalism and abilities of mortgage servicers, some homeowners have sailed through the process of refinancing. They report that having lower payments has allowed them to stay in their homes while keeping their spirits up.

Other homeowners, unfortunately, have run into multiple barriers as they go through the process. In some cases, the mortgage servicers they’ve contacted have been hard to reach and won’t readily respond to their calls. Others have run into servicers who request the same information multiple times and yet do nothing to move the homeowner forward in the process.

Tips to making the foreclosure prevention plan work for you

If you think the foreclosure prevention plan is the right step for you and your financial situation, act now to get started in the process. In addition, follow the tips below to make sure you can avoid the grief experienced by other homeowners in similar situations.

• Choose the right mortgage servicer. The best way to find a mortgage servicer is to ask trusted friends and family members who they would recommend. Don’t go with the person who has the flashiest advertisement or with someone who is offering simple incentives, such as a free gift certificate to your favorite restaurant. Instead, seek out people who recently refinanced their homes or even took out home equity loans. Ask them whether their mortgage servicer was responsive to their requests, was easy to reach, and whether that person acted quickly to address their needs.
• Document all interaction. Because so many mortgage servicers are being inundated with requests to refinance, it’s important to keep track of all interactions you have with your servicer. When you speak to your servicer via phone, write down the time, date, and nature of the call. Record the name of the person with whom you spoke and write down his or her contact information. Similarly, print all email correspondence and keep copies of any documents you received or sent via fax or the mail. If your mortgage servicer tells you he or she will do something for you regarding your refinance, it’s important that you have proof of when and how the promise was made.
• Be diligent (and patient). If your mortgage servicer tells you he or she will call back or send you something and then doesn’t, contact that person and politely remind them of their intention. Even the most dedicated servicers can fall behind on their work, so it doesn’t hurt to reiterate that you need something from them. Be persistent about contacting your servicer until you get what you need – don’t simply wait for what you need, as your request could have fallen through the cracks without anybody else noticing.

The right follow-through may very well allow you to stay in your home

Taking up the burden of steering a refinance request through the hands of a mortgage servicer can be time-consuming and trying, but keep your eye on the ball. In the end, when your payments are lowered and your financial security is stable, it will all be worth whatever time you invest upfront.