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Does the government have ways to help avoid foreclosure?

Avoiding foreclosure is something that can help you keep your home, even in the direst of financial situations. How can you do it, though, when your funds are running low?

The U.S. Department of Housing and Urban Development has several options other than foreclosure or bankruptcy for people struggling to pay for their homes. The Making Home Affordable Act has been an integral part of the Obama Administration's aim to reduce foreclosure rates and to improve the economy. How does it work? With the program, the homeowners may be able to reduce monthly mortgage payments and to get better and more stable mortgage loans.

For example, if you have high payments, the Principal Reduction Alternative is designed to encourage investors and servicers to lower the amount you owe on your home when the home's worth has dropped significantly. The Home Affordable Refinance Program is designed to help you refinance your home when other traditional refinancing options aren't open to you.

If your mortgage is underwater, which means that you owe more money on your loan than your home is worth, then you may be able to refinance through HARP or use the PRA to get an investor to reduce the cost of your home. If those options won't work for you, you may be able to use the Treasury/FHA Second Lien Program to eliminate a second lien and to consolidate your mortgage debt. The new debt won't be allowed to be more than 115 percent of your home's current value, which can be beneficial if your home's value has dropped significantly.

Source: U.S. Department of Housing and Urban Development, "Avoiding Foreclosure," accessed Aug. 20, 2015

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