With the current world, life keeps changing every day. It gets harder and harder. More responsibilities and more need for money. This can be frustrating especially when your income cannot keep up yet you want to live the life you so desire as life is lived only once. As you get your mortgage, it is important that you do some negotiations with your lender so that you are able to pay back without struggles. You should take care of the interest rates and the amount of time needed to complete servicing the loan. After doing all this, then you are good to go. The question that I am sure is now lingering in your mind is just how you get to negotiate for a modification of the loan.

The first and foremost thing to do is be honest with your lender. Let them know that you acknowledge that you are behind schedule in paying for the loan. When you get a letter from your lender asking to see you, please do no run away. Make sure that you contact your lender so that you can save yourself from foreclosure. This is neither good for you or them. For you, it is losing your dear investment and foreclosure is expensive to the lender and keeping this in mind as I am sure that your lender will be more than thrilled to help.

After you get to talk to your lender about the issue, ensure that you work out a way that you can use to service the loan. The very essence of going clean with your lender is for the assessment of your situation. The lender is able to determine whether it is long-term or short term. If your problem is short term, your lender can decide to give you some sort of “off” in payment meaning that you will stop paying for a certain agreed amount of time and resume later. After the agreed time, you may be back to your feet again and continue servicing your loan until you are done with it. If your problem happens to be long term, your lender can devise a modification that will work for you. Interest rates that are lower and therefore you get to pay at a longer period of time which will not be a problem to you. However, if there is some kind of positive change in your income, you could also change the terms and reduce payment time. The quicker the payment is for you the better for you. You will go back to your normal loan-free life faster.

All this I have talked about is basically refinancing your loan which is getting modification on an earlier obligation. Mortgage modification loans are great and so when you get a foreclosure warning, please do not panic but fearlessly stay very calm.

There are many blog posts and news reports out there describing the plan, usually riddled with technical terms and formulas that are hard to follow. In reality the rules of the Obama Loan Modification are fairly simple. You can qualify if:

• Your total monthly housing costs (mortgage, taxes, insurance, Homeowners Association fees etc…) are greater than 31% of your average gross monthly income.

Example of calculation:

Gross Monthly Income: $2000

Combined Housing Costs: $800

Your Percentage: 800/2000*100 = 40%

If your housing costs are over 38% of your monthly income, the mortgage company is partially compensated by the government to reduce that ratio to at least 38% by whatever means available. Such means include increase of the loan term, decrease of the interest rate as well as others. The important thing to remember here is that the lender participation is voluntary.

• You have not originated your loan after January 1, 2009 – Simple enough: they want to make sure you didn’t close your loan after the January 1st deadline. Any date before that is acceptable.

• The property has no more than 4 units. 5-unit or larger properties are excluded from the Obama Loan Modification plan

• You must occupy the property. Rental and investment properties are excluded to ensure the plan helps those who need it most.

• You must be experiencing financial hardship. What this means is that you have to be able to explain the reason you can no longer afford you monthly payments. These reason can range from dramatic increase in monthly expenses to loss or reduction of income.

• Your current loan balance must be under $729,750 as of the 1st day of 2009

The Obama Loan modification plan at the very least has given guidance to an industry that truly needs it. At its best — millions of homeowners will once again be able to afford their houses and our economy will start to bounce back over time with a new confidence in the housing market and our nation.

Remodification

This is where things can get confusing: a loan remodification is doing the same as mentioned above after you have already successfully went through the process the first time. The problems begin when the modification is accepted just because it’s better than what someone may have now, but it’s not good enough long-term for that homeowners overall situation. Most banks don’t make it easy for homeowners to modify the first time around, that’s why so many people are turning to companies with experience, such as a non-profit or a law firm. The second time is even harder: a loan remodification means it didn’t work the first time. Why go through the effort again for no reason, can be the bank’s rationale.

This in my opinion is why a certifed representative working on your behalf, can be so valuable. If you are in a situation where you have already modified your loan and it doesn’t look like it’s going to work, contact your lender or someone who can work on your behalf with them. If you are going to have a chance in making your loan remodification work, the best bet is to do it before you become delinquent again.

Typically these type of loans have a cap built in to protect borrowers from getting stuck with an unreasonable payment amount however the downward spiraling of home values has pushed the loans to their cap sooner than expected. The cap allows the principal to accrue to a percentage of a homes value, in many cases this is 120%. Due to the current dip in home values the balances on these loans have already reached the max, forcing homeowners to pay the principal & interest payments they weren’t expecting to pay for years – payments which many cannot afford to make.

As we are all too aware job losses are still on the rise and there is no clear sign that the vicious cycle is coming to an end any time soon. As part of the new efforts put forth by the Obama administration new opportunities are available for homeowners who find themselves in this situation. Borrowers who wanted to refinance in the past but could not qualify because their properties have lost value may be able to get a new more affordable rate meaning a lower payment.

There are a few indicators to consider when determining if you are eligible for this type of loan re-modification. First, is your loan held or guaranteed by Fannie Mae or Freddie Mac? Second, is your property a primary residence? Third, is your first loan amount equal to or less than 105% of your current property value? If you can answer yes to all 3 of these indicators then you are one step closer to getting off the track of foreclosure.

Re-negotiating your loan directly with the bank can be a daunting task at best. Imagine how much the bank does NOT want to loose money and then combine that fact with the reality that they are the ones that “set the rules” for what rate they will offer in the re-negotiation. You are clearly the underdog in this match.

Reportedly more and more homeowners contact non-profit loan modification companies after hitting the wall trying to negotiate with banks directly. Contacting a non-profit company to assist with the negotiations has proven to be a benefit to thousands of borrowers to date. The non-profit already has a relationship with the banks and experience re-negotiating loans for struggling homeowners. They know how low the bank can go and what rate other struggling homeowners in similar scenarios have received. Non-profit companies also know the logistics of the new government plans, such as HASP, Making Home Affordable, etc. and finding the right plan for you even if you don’t know what plan you want to utilize, if one is available.

Mobile Home in Arizona

When mobile homes were first being sold, most did not qualify for traditional mortgages, as most lenders treated them much the same a vehicle sales. After all, a buyer who could not make their payments could hook them up to a truck and drive them away to avoid mobile home foreclosure. However, as more people began buying mobile homes and they became more a part of the landscape, lenders became more acceptable to providing financing and when a homeowner could not make their payments, mobile home foreclosure began as opposed to repossession as in auto loans.

Typically, the price of a mobile home is considerably less than a traditional home and during a mobile home foreclosure, the land on which it is located, is usually not included in the sale. This type of unique situation exists because the home can be bought and moved by a new owner and the land sold separately by the mortgage holder. Additionally, homes reclaimed during a mobile home foreclosure can be moved to a sales lot and sold as used and not necessarily by auction.

Loan Determines How Money Is Collected

Credit collection laws may vary slightly by state, but federal laws also govern the process of disposing of property confiscated in a mortgage foreclosure. With the homes being on wheels, moving them off the property may also reduce their value, especially if the new buyer is putting them into a mobile home community instead of on private land.

Depending on the type of financing obtained by the original buyer, the mobile home foreclosure process will be similar to the foreclosure process of a traditional home. The lender has to go to the local court and show that the borrower has not fulfilled their financial obligation and the only way for the lender to be repaid is to have the court sell the property on their behalf. Once approved for sale, the mobile home is put on the auction block and any money over what is owed on the home goes to the owner.

Despite being similar to repossession of a vehicle, if the home loan was granted in the form of a mortgage in partnership with the land on which it sits, the land and home may be sold together. However, in most instances of a mobile home foreclosure the land can be sold separately, unless it is a part of the original loan with the value of the land included in the collateral for the purchase of the mobile home.

A foreclosure refinance is where you get your loan refinanced while you are in the middle of a foreclosure process. Luckily, laws allow for homeowners to seek that option of foreclosure financing in order to help save their home. A foreclosure refinance is not going to be cheap though and there is probably going to be some up front money that will be needed to close the loan. Also keep in mind that your interest rates are not going to be all that great when doing a foreclosure refinance.

How To Get It Done

The best thing to do is to start calling around in order to see who can help you with a foreclosure refinance and what it is going to cost you out of pocket. Once that is said and done make sure that you are comparing interest rates that are being offered to you. Keep in mind that because of the hits on your credit for non-payment, you are not going to be offered the best rates out there but you still can be careful with what you sign for. A foreclosure refinance does not mean that you have to be taken advantage of.

And when you finally decide it is time to start looking for a foreclosure refinance you need to make sure what time limit you have. Depending on the state your home is in is going to determine how much time you truly have. A foreclosure refinance could take a little bit of time so you have to make sure that you have that time to spare. You certainly do not want to go through all of this just to have the house taken away at a foreclosure sale and you went through all of that time and trouble for nothing.

If you found yourself in this situation, feel free to give us a call (1-866-236-8896) or apply online. We will personally review your scenario and let you know if we can help. There are a number of government mortgage modification (also known as the mortgage relief) programs currently available that may or may not apply in your particular case. We may be able to help you reduce your mortgage payment and adjust your mortgage to the current value of your home thus preventing foreclosure.

The “Home Affordable Refinance” program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the “Home Affordable Refinance” program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments. Working with the
banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines
that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. This program will work in tandem with an expanded
and improved Hope for Homeowners program.

With the information now available, servicers can begin immediately to modify eligible mortgages under the Modification program so that at-risk borrowers can better afford
their payments. The detailed guidelines (separate document) provide information on the following:

Eligibility and Verification

• Loans originated on or before January 1, 2009.
• First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.
• All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
• Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.
• Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.
• Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

Loan Modification Terms and Procedures

• Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.
• Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive – meaning that the net present value of expected cash flow is greater in the modification scenario – the servicer must modify absent fraud or a contract prohibition.
• Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions.
• Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).
• The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.
• The monthly payment includes principal, interest, taxes, insurance, flood insurance, homeowner’s association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income.
• Servicers must enter into the program agreements with Treasury’s financial agent on or before December 31, 2009.

Payments to Servicers, Lenders, and Responsible Borrowers

• The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI.
• Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus “pay for success” fees on still-performing loans of $1,000 per year.
• Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.
• The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.
• The program will include incentives for extinguishing second liens on loans modified under this program.
• No payments will be made under the program to the lender/investor, servicer, or borrower unless and until the servicer has first entered into the program agreements with Treasury’s financial agent.
• Similar incentives will be paid for Hope for Homeowner refinances.

Transparency and Accountability

• Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program.
• Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation.
• Freddie Mac will audit compliance.

Mortgage Loan Modification

In the past when homeowners were faced with job loss or a change in circumstances that restricted their ability to afford their home and were not able to pay their mortgage they would have the option to refinance with lower interest rates or sell their property. For most currently this is no longer a viable option.

Struggling homeowners cannot refinance due to plunging property values resulting in upside down mortgages, and even when they find a buyer for their property there is the challenge of not be able to sell for enough to repay the outstanding balance.

According to the data from the Mortgage Bankers Association (MBA) 11% of the nation’s home mortgages were delinquent by at least one payment, already in foreclosure or entering foreclosure. 7% of mortgage were at least 1 month past due and 3% of the nation’s mortgages are currently in the foreclosure process. MBA estimated that a total of 2.2 million homes went into foreclosure in 2008, a number the group expects will grow significantly in 2009 as unemployment rises while the home values continue to plunge.

The quarterly survey published by the Federal Reserve, called the Flow of Funds Report, shows the movement of funds between households, businesses, the government, and financial institutions. It also shows whether debt levels increased or decreased and what the savings rate is. According to the report, the total value of all home mortgages in the U.S. was $11.2 trillion through the third quarter of 2008, which ended in September. Theses figures in combination with other hardships American’s are facing paint an uncertain picture with a continually shrinking list of options.

There are several plans already underway lead by Federal Housing agencies & the Treasury, which may be expanded. Two plans that are receiving a lot of attention are being presented by the Federal Housing Administration (FHA) and the Federal Deposit Insurance Corporation (FDIC).

The largest plan, known as “Hope for Homeowners” offered by the Federal Housing Administration (FHA) allows lenders to refinance borrowers into an FHA-insured fixed rate mortgage, also know as ‘mortgage modification’, if the lender writes down the existing mortgage balance and pays an up-front insurance premium. Borrowers participating in the plan must share any future appreciation of the home’s value with the federal government. The biggest challenge to face this plan is the resistance of banks and current mortgage holders to agree to write down a mortgage’s principal thus reducing the value of the loan.

The plan run by the Federal Deposit Insurance Corporation (FDIC) and used during that agency’s conservatorship of IndyMac last year, lets individual borrowers and lenders re-work a mortgage themselves, but commits the government to share in 50 percent of the losses, should the borrower re-default. This plan has not received as much attention as the FDA plan, and it seems that every week that goes by another plan is introduced to a sour reception.

The Mortgage Bankers Association’s most recent report shows delinquency and foreclosure statistics are likely less than market reality. It appears that some larger banks have halted all foreclosures while other banks have stopped keeping track of how far behind borrowers are while they work with those borrowers on modifying their mortgages.

In fact, according to MBA, almost every state had an increase in mortgages that were more than 90 days past due but were not in foreclosure. Normally, a mortgage that is more than 90 days past due is foreclosed on.

Any proposed plan faces a daunting task, given the massive numbers of mortgages in foreclosure and the staggering value of the mortgage market itself however there is hope. Working with your lender to find a mutually acceptable agreement to modify your mortgage seems to be the next step in approaching the end of this painful market normalization.

Family A: Access to Refinancing

• In 2006: Family A took a 30-year fixed rate mortgage of $207,000 on a house worth $260,000 at the time. (The family put just over 20% down.) They received a Fannie Mae conforming loan with an interest rate of 6.50%.

• Today: Family A has about $200,000 remaining on their mortgage but their home value has fallen 15 percent to $221,000.
• Their “loan-to-value” ratio is now 90%, making them ineligible for a Fannie Mae refinancing.

Under the Refinancing Plan: Family A can refinance to a rate of 5.16%. This would reduce their annual payments by nearly $2,350.

Family B: Access to Refinancing

• In 2006: Family B took a 30-year fixed rate mortgage of $350,000 on a house worth $475,000 at the time. (The family put just over 26% down.) They received a Fannie Mae conforming loan with an interest rate of 6.50%.

• Today: Family B has about $337,460 remaining on their mortgage but their home value has fallen to $400,000.
  • Their “loan-to-value” ratio is now 84%, making them ineligible for a Fannie Mae refinancing.

Under the Refinancing Plan: Family B can refinance to a rate of 5.16%. This would reduce their annual payments by nearly $4,000.

Family C: Eligible for Homeowner Stability Initiative

• In 2006: Family C took out a 30-year subprime mortgage of $220,000, on a house worth $230,000 at the time (they put less than 5% down). Their mortgage broker – Mom & Pop Mortgage – sold their loan to Investment Bank. The interest rate on their mortgage is 7.5%.

• Today: Family C has $214,016 remaining on their mortgage but their home value has fallen -18% to $189,000. Also, in November, one parent in Family C was moved from full-time to part-time work, causing a significant negative shock to their income.
  • Their loan is now 113% the value of their home, making them “underwater” and unable to sell their house.
  • Meanwhile, their monthly mortgage payment is $1,538 and their monthly income has fallen to $3,650, meaning the ratio of their monthly mortgage debt to income is 42%.

• Under the Homeowner Stability Initiative: Family C can get a government sponsored modification that – for five years – will reduce their mortgage payment by $406 a month. After those five years, Family C’s mortgage payment will adjust upward at a moderate, phased-in level.

While the plan which is scheduled to begin on March 4th 2009 is estimated to help 9 million homeowners, there are certain groups that are unfortunately outside of the plan’s reach. Here are the five most important things you Must know about the HASP:

1. Homeowners with conforming mortgages (mortgages under $417,000) may qualify to refinance at a lower rate. Some homeowners may be able to qualify even if they have never been seriously behind on their mortgages.

2. Homeowners with subprime or so-called “exotic” loans may qualify
to modify their current loans to make the payments more affordable.

3. Both of the above groups may be able to qualify even if their property is worth as much as they owe.

4. Homeowners who’s loan amounts are much higher than the value of their property most likely are outside of the scope of the proposed plan. This unfortunately will affect the markets where real estate prices have taken the steepest declines, such as California, Florida, Nevada and Arizona.

5. Homeowners who’s loans were not securitized by Fannie Mae or Freddie Mac may find it difficult to refinance or adjust their rates. Most homeowners may not know or realize that unless they have specifically asked their lenders.