Impact 5: Change in federal law to help thousands of Florida families caught in housing crisis

WEST PALM BEACH, Fla. - Help is on the way for thousands of Florida homeowners caught at the center of the housing crisis.

Starting as early as May,
changes being made to a federal program will allow homeowners -- for the first time -- to request that lenders modify mortgages on their rental properties.

The modifications, until now, had only been allowed for principal residences.

"You realize it's either, you fight it out and try to pay that payment, or let that property go," said Jake Espero, a Palm Beach County resident who bought his father's townhome in Lake Worth before it went under water.

Espero's story is a familiar one in South Florida.

He lost his job at a loan modification company but still tried to make the $2,000 monthly mortgage payments.

He also tried to find a tenant for his property.

He walked away from the home after he couldn't keep up with the payments.

"When you have a rental property your expectations are you're going to make money -- maybe not a ton of money -- but just something to sustain your family," he said. "We were stuck under water with a mortgage that was upside down by $150,000."

Paul Baltrun, director of the Homeowner Assistance Division of the Law Firm of Paul A. Krasker, said the changes in federal law could be a game changer for thousands of Florida families.

"I can't tell you how many clients we have, and how many people that I've talked to, who over the last four years, are literally in a negative cash flow position on their rental property," he said. "A lot of people still have good credit with these rental properties. They've been forced into a position to decide whether or not they want stop paying on the mortgage because it's very difficult to afford the negative cash flow position, or they want to help preserve their credit."

Espero, who spent part of his childhood in his father's home, said the ability to modify the loan on his townhome could potentially allow him to catch up on mortgage payments.

He also said it could open the door to finding a tenant because he could afford to lower the monthly rent.
    
"I think that there's still potential in this house," he said. "We could benefit from it and make a financial gain. If we modify the loan, if nothing else, we would be able to sustain the mortgage on our own."

Baltrun said 90,000 mortgages in Florida had already been permanently modified.

He expected thousands of additional mortgages in Florida would qualify for the modifications when the changes to the federal law went into effect later this year.

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