Posted on: 13th Nov, 2007 03:08am
If you're facing financial hardships and almost on the brink of foreclosure, then you can negotiate with your lender for a workout plan to avert foreclosure. You have few options available before you to avoid foreclosure. These options are deed in lieu, short sale, forbearance and of course loan modification.
- What is a loan modification program?
- Are you eligible for mortgage modifications?
- What are the different loan modification programs?
- When is loan modification right for you?
- What are the benefits of loan modification program?
- What should you remember at the time of loan modification?
- What are the outcomes of a mortgage modification?
- How much time does loan modification take?
What is a loan modification program?
Mortgage loan modification is a program where your lender agrees to reduce your mortgage rate, extend the loan term, change the type of the loan etc in order to lower down your monthly payments.
Are you eligible for mortgage modifications?
You may be eligible if:
- You're at least 3 months delinquent on the loan.
- You took out the loan more than 12 months ago.
- You have stable income.
- The property has not been sold at a sheriff's sale.
- The property is in good physical condition.
What are the different loan modification programs?
There are a few modification programs which have their unique features. Here we briefly discuss about 2 most prevalent programs.
Treasury Loan Modification Program
This program has been designed by the Obama administration in association with the US Treasury. This is a very inclusive program in the sense that it is not only helping the homeowners currently in financial difficulties but also assisting the homeowners who have lost significant equity in their homes and who are foreseeing tough financial times ahead.
Federal Housing Finance Agency Loan Modification Program
This is the newest mortgage modification program offered by the Federal Housing Finance Agency (FHFA). FHFA serves as the supervisory regulator of Freddie Mac and Fannie Mae. This program is only applicable to the mortgages held by Freddie Mac and Fannie Mae.
Treasury Loan Modification Program
This program has been designed by the Obama administration in association with the US Treasury. This is a very inclusive program in the sense that it is not only helping the homeowners currently in financial difficulties but also assisting the homeowners who have lost significant equity in their homes and who are foreseeing tough financial times ahead.
Federal Housing Finance Agency Loan Modification Program
This is the newest mortgage modification program offered by the Federal Housing Finance Agency (FHFA). FHFA serves as the supervisory regulator of Freddie Mac and Fannie Mae. This program is only applicable to the mortgages held by Freddie Mac and Fannie Mae.
When is loan modification right for you?
Loan modifications are right for you when:
- You have experienced a long-term reduction in income.
- Your monthly expenses have increased.
- You don't have enough income to pay off mortgage dues.
What are the benefits of loan modification program?
This mortgage program alters the terms and conditions of a loan that has been agreed upon between you and your lender. Some of its benefits are listed below.
1. Averts foreclosure
With this you can avoid the severe negative consequences of foreclosure and short sale.
2. Restores credit score
With this you can protect your credit score. Foreclosure damages your score badly and it remains on your credit report for around 7 years.
3. Lowers principal balance
Principal balance is the amount of the loan amount (without interest) that has to be still repaid. Sometimes, be negotiating with the lender, you can lower down the remaining principal balance.
4. Reduces rate of interest
This mortgage program may help you lower down the rate on the loan. This in turn makes payments more affordable for you.
5. Extends the loan term
Loan modification may extend the term of the loan. With extension of the loan term, rate gets lowered. This actually helps you make payments easily.
6. Converts ARM to FRM & vice versa
This offers you the chance to convert an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM) and vice-versa. You may be willing to switch to the safety of making fixed payments offered by FRM from your existing ARM. Again, the rate on your existing FRM may be too high. In such case, you may want to convert FRM to ARM.
7. Waives off late charges
Your late charges may sometimes be waived off by your lender.
1. Averts foreclosure
With this you can avoid the severe negative consequences of foreclosure and short sale.
2. Restores credit score
With this you can protect your credit score. Foreclosure damages your score badly and it remains on your credit report for around 7 years.
3. Lowers principal balance
Principal balance is the amount of the loan amount (without interest) that has to be still repaid. Sometimes, be negotiating with the lender, you can lower down the remaining principal balance.
4. Reduces rate of interest
This mortgage program may help you lower down the rate on the loan. This in turn makes payments more affordable for you.
5. Extends the loan term
Loan modification may extend the term of the loan. With extension of the loan term, rate gets lowered. This actually helps you make payments easily.
6. Converts ARM to FRM & vice versa
This offers you the chance to convert an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM) and vice-versa. You may be willing to switch to the safety of making fixed payments offered by FRM from your existing ARM. Again, the rate on your existing FRM may be too high. In such case, you may want to convert FRM to ARM.
7. Waives off late charges
Your late charges may sometimes be waived off by your lender.
What should you remember at the time of loan modification?
While negotiating on a mortgage modification, you should keep in mind the following points:
- Check out your financial health: You need to review your finances carefully. Lender may ask a personal financial statement from you. You need to keep that ready. Your financial statement should contain a comprehensive list of all your expenses such as credit card bills, utility bills, food expenses and other financial obligations. You should estimate the average expenses on each item for the 3 months in order to better assess your financial health.
- Prepare a hardship letter: In order to apply for a loan modification, you need to prepare a hardship letter . The hardship letter should satisfactorily explain the reasons behind your inability to pay off the mortgage. It should also explain why you are looking for loan modification.
- Gather necessary documents: Before offering you a mortgage modification deal, lender asks for certain documents. You need to keep these documents ready. These documents include :
- Your bank statements and pay-stubs of last 2 months
- W-2 form of last 2 years in support of your annual wage and taxes
- 1040 Form of last 2 years as a proof of annual income tax returns
- Latest mortgage statements
- Hardship letter
- Current property tax statements, if available
- Intimate your lender about your position: It is wise to intimate your lender about your financial position. If you are unable to keep up with the mortgage payments, lender may offer you a loan modification program. But, for that you need to contact your lender
- Complete the necessary paperwork: Before approving your loan modification appeal, lender sends a financial worksheet to you. You need to fill up that worksheet carefully and send it to the lender along with other necessary documents. After receiving all these, lender assesses your financial health and determines whether you can repay your mortgage after modification.
What you need to show is that you are still able to repay your mortgage even if you are not able to meet your current monthly payments. - Get a written agreement: Â If the lender agrees to modify your loan, you should obtain a written confirmation from the lender. Mere verbal confirmation won't suffice .
- Follow the stop gap repayment arrangement: If you apply for loan modification program, lender can't offer it to you with immediate effect. It requires some time (maximum of 60 days) for the lender to make the offer. This time gap is required to check your financial statements, loan status and other documents. During this time, lender wants you to follow a stop gap repayment plan.
What are the outcomes of a mortgage modification?
- You can keep up with mortgage payments.
- You can convert your ARM into a fully amortized FRM.
- The principal, interest, taxes and insurance (PITI), may be or may not be included in the current loan balance.
- If the past dues are added, the modified principal balance amount may be more than 100% of the LTV of the original principal balance.
- Modified loan balance may include administrative charges caused due to the cancellation of foreclosure.
How much time does loan modification take?
You have to wait several hours to file your loan modification appeal. When your turn comes, you have to present your case confidently. You should have all the relevant documents ready with you. This is not a very easy task.
You may have to wait for several weeks to get the final modification offer after your case gets registered. Your lender may tell you about your course of action in the meanwhile. You may be told by the lender to keep on making payments so as to qualify for loan modification. You need to follow it seriously so as to get the approval.
The purpose of loan modification is to ensure that you can better afford your mortgage payments. Make sure you don't miss payments under the modification agreement, as the lender will consider it a new default and it will be harder to negotiate a second modification. With each default, the chance of losing the home in foreclosure rises.
You may have to wait for several weeks to get the final modification offer after your case gets registered. Your lender may tell you about your course of action in the meanwhile. You may be told by the lender to keep on making payments so as to qualify for loan modification. You need to follow it seriously so as to get the approval.
The purpose of loan modification is to ensure that you can better afford your mortgage payments. Make sure you don't miss payments under the modification agreement, as the lender will consider it a new default and it will be harder to negotiate a second modification. With each default, the chance of losing the home in foreclosure rises.
Related Readings
I was out of work for 3 months back in the late spring and early summer. After I obtained a new job I spoke with my lender and they wanted me to pay a three month "good faith" payment which was only a little above my current payment. I paid those 3 "good faith" payments and now I received a loan modification letter. The letter sets my loan back to 360 months and totally offsets the 2 years I have been paying on the loan. I owed 78,000 on my home and now according to this i will now owe 84,000. THis also increased my monthly payment by over $105 a month. THere is no way I can afford this. I thought a mortgage modification is supposed to help not hurt?? Any ideas on what I should do, I am very confused and lost. THanks in advance.
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Mortgage loan modification
Your query has been replied in the given page:
http://www.mortgagefit.com/problems/modification-interestrate.html
Please take a look at it. I hope it will help you.
http://www.mortgagefit.com/problems/modification-interestrate.html
Please take a look at it. I hope it will help you.
my husband and i have been i thought working with our mortgage company since feburary to modify our loan my huband was laid off from his job in march but before that he had to take a cut in pay by $4.00 an hour. and before this my husband was not getting 40 hours at his job so we fall behind with our payments. as soon as all this happened i contacted the mortgage company to explain what was going on. i thought we were getting somewhere but now i don't feel this way. we did a payment plan of 3 months thought we would hear so good news but we have only been told the we are to do another payment plan only this one is $903.00 a month for 3 months. our current mortgage payment in $809.00 if we could not make this how can we pay the 903.00. we plan on losing our home now. so much for obamas help for us
Hi debbie!
Welcome to forums!
I can understand that you are facing a tough situation. As you've successfully paid off the payment plan given to you on a trial basis, you should ask your lender as to why they are asking for another payments plan. You may even confirm it with them as to whether you would get the loan modification once you pay off according to the new payment plan. If the lender cannot assure you about it, you should better try for a deed in lieu of foreclosure.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
I can understand that you are facing a tough situation. As you've successfully paid off the payment plan given to you on a trial basis, you should ask your lender as to why they are asking for another payments plan. You may even confirm it with them as to whether you would get the loan modification once you pay off according to the new payment plan. If the lender cannot assure you about it, you should better try for a deed in lieu of foreclosure.
Feel free to ask if you've further queries.
Sussane
Hello Debbie. Who is your loan through? Find out how the top level executives are and start calling. I am in a similar situation but have not yet started my "trial period". I contacted Barbara Desoer, the executive of the home loan division for bank of america. I called her three times a day, morning, noon and night and have now received confirmation from a "senior negotiator" that my modification has been approved and documents will be sent to me. I also filed a complaint with the Better Business Bureau and contacted my STATE senators. Both of my State senators have contacted B of A and appear to be making inquiries on my behalf. You should not have to start another trial period. In addition, the trial payments should be lower than your current mortgage payment. Who owns your loan? Have you signed modification paperwork? Fannie Mae guidelines are online and banks are required to abide by the the guidelines. I wouldn't give up by allowing a foreclosure to happen or signing over your home by way of a deed in lieu of foreclosure without a fight. If you have to contact a CEO or other top level executive 10 times a day, do it. They get tired of taking your call. Please let me know if I can help you. Good luck
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my husband and i have been i thought working with our mortgage company since feburary to modify our loan my huband was laid off from his job in march but before that he had to take a cut in pay by $4.00 an hour. and before this my husband was not getting 40 hours at his job so we fall behind with our payments. as soon as all this happened i contacted the mortgage company to explain what was going on. i thought we were getting somewhere but now i don't feel this way. we did a payment plan of 3 months thought we would hear so good news but we have only been told the we are to do another payment plan only this one is $903.00 a month for 3 months. our current mortgage payment in $809.00 if we could not make this how can we pay the 903.00. we plan on losing our home now. so much for obamas help for us
my husband and i have been i thought working with our mortgage company since feburary to modify our loan my huband was laid off from his job in march but before that he had to take a cut in pay by $4.00 an hour. and before this my husband was not getting 40 hours at his job so we fall behind with our payments. as soon as all this happened i contacted the mortgage company to explain what was going on. i thought we were getting somewhere but now i don't feel this way. we did a payment plan of 3 months thought we would hear so good news but we have only been told the we are to do another payment plan only this one is $903.00 a month for 3 months. our current mortgage payment in $809.00 if we could not make this how can we pay the 903.00. we plan on losing our home now. so much for obamas help for us
Hi debraj!
Welcome to forums!
Your question is same as Debbie's. I would suggest you to check out the above two posts which may help you in deciding what steps you need to take.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Your question is same as Debbie's. I would suggest you to check out the above two posts which may help you in deciding what steps you need to take.
Feel free to ask if you've further queries.
Sussane
HOW IT BEGAN
Due to job loss, we haven't paid our mortgage since Jan. 08 (past 19 mos.). Well Fargo started the foreclosure process in April of 08. We stayed in constant communication with them and also put our house on the market at that time. I'm not sure if this bought us any time or not but when we finally went to court in Oct. 08, we told the judge it was listed and he gave us until Jan. 5, 09. We ended up with an offer on the house but it took the bank too long to respond and by the time they did respond agreeing to the offer, the buyer pulled out. This was in December 08. At that point, with the option of a short sale out of the question, we asked for a loan modification. It took them several months to finally get back to us but in April of 09, after submitting our debt to income information, they asked us to submit three consecutive payments of $1,165. We did that. Upon completion, Wells Fargo then sent the loan modification with the new terms, they are as follows: 5% APR fixed for 30 years, $1,165 monthly. That part was completely acceptable. What was not acceptable is that: (1.) They want to tack on $22K of capitalization for the past 19 months (16 really if you subtract the 3 from earlier) of non payments. The actual amount owed on our home is $155K. The current market value is $70K. (2.) They also want us to pay $3,600 by Sept. 6, 09 for attorneys fees and administrative cost. (LOL) In the end, the grand total amount for our home will be $177K. Our home is a 1944 frame house of 1000 sq. ft. We could live here a lifetime and never recoup the the value. In fact our kids (7 & 4) might not see the day this house reaches $177K.
THE CURRENT STATE
So the latest is, I sent them a letter stating that I would like them to consider my terms: 5% fixed for 30 years, the total value of the home not to exceed $155K and no up front money. These terms would sill put the lender in a position of positive expectancy while allowing us to keep our home. If they do not agree to our terms then they can have the house back which will guarantee them only one possible outcome...a loss.
MY OPINION
This was a difficult decision but look at the big picture. Is the bank really working with us/others? Ok, so they've agreed to lower our interest rate, great. But they're still making up all their losses by adding it to the back of the loan. Basically they've told us that not only is your home upside down now, but it will likely remain upside down the entire length of the loan. Come on! Are you kidding me? Do they really expect people accept that? At some point we are going to have to take the loss. That being the case, I will chose to take the loss now and get it over with and move on. Wake up investors! There's nothing like cutting your nose off despite your face.
I will keep you posted as to the final outcome. I'm not expecting much.
Due to job loss, we haven't paid our mortgage since Jan. 08 (past 19 mos.). Well Fargo started the foreclosure process in April of 08. We stayed in constant communication with them and also put our house on the market at that time. I'm not sure if this bought us any time or not but when we finally went to court in Oct. 08, we told the judge it was listed and he gave us until Jan. 5, 09. We ended up with an offer on the house but it took the bank too long to respond and by the time they did respond agreeing to the offer, the buyer pulled out. This was in December 08. At that point, with the option of a short sale out of the question, we asked for a loan modification. It took them several months to finally get back to us but in April of 09, after submitting our debt to income information, they asked us to submit three consecutive payments of $1,165. We did that. Upon completion, Wells Fargo then sent the loan modification with the new terms, they are as follows: 5% APR fixed for 30 years, $1,165 monthly. That part was completely acceptable. What was not acceptable is that: (1.) They want to tack on $22K of capitalization for the past 19 months (16 really if you subtract the 3 from earlier) of non payments. The actual amount owed on our home is $155K. The current market value is $70K. (2.) They also want us to pay $3,600 by Sept. 6, 09 for attorneys fees and administrative cost. (LOL) In the end, the grand total amount for our home will be $177K. Our home is a 1944 frame house of 1000 sq. ft. We could live here a lifetime and never recoup the the value. In fact our kids (7 & 4) might not see the day this house reaches $177K.
THE CURRENT STATE
So the latest is, I sent them a letter stating that I would like them to consider my terms: 5% fixed for 30 years, the total value of the home not to exceed $155K and no up front money. These terms would sill put the lender in a position of positive expectancy while allowing us to keep our home. If they do not agree to our terms then they can have the house back which will guarantee them only one possible outcome...a loss.
MY OPINION
This was a difficult decision but look at the big picture. Is the bank really working with us/others? Ok, so they've agreed to lower our interest rate, great. But they're still making up all their losses by adding it to the back of the loan. Basically they've told us that not only is your home upside down now, but it will likely remain upside down the entire length of the loan. Come on! Are you kidding me? Do they really expect people accept that? At some point we are going to have to take the loss. That being the case, I will chose to take the loss now and get it over with and move on. Wake up investors! There's nothing like cutting your nose off despite your face.
I will keep you posted as to the final outcome. I'm not expecting much.
Your query has been replied in the given page:
http://www.mortgagefit.com/inprocess/about26912.html#117105
Please take a look at it. I hope it'll help you.
http://www.mortgagefit.com/inprocess/about26912.html#117105
Please take a look at it. I hope it'll help you.
i agreed to co sign a mortgage loan with my uncle out of gratitude for allowing us to stay at their home for a month when we moved to jersey. he bought a condo in vegas and used my name as the principal buyer since he has an outstanding loan with another mortgage company. he promised he will pay off the loan in 6 months so my name will be out/erased in that agreement. now, the big problem is this: yesterday he called to say he was filing for a loan modification or worse bankruptcy. how can i get off this mess? can i file for a quit claim deed before he files for loan modification? what are my options to get off this deal? i only agreed to do this out of gratitude, now i'm on the losing end. can you please help me? my future and my family's future is at hand. thank you so much for your attention.
if you do quit claim deed, you are still liable for the loan
he can not get the loan modficiation on this loan with out your signature unless he is goign to refinance the loan inhis name
he can not get the loan modficiation on this loan with out your signature unless he is goign to refinance the loan inhis name
Hi Loriekelly,I'm trying to get a loan modification with Bank of America (BoA) too and would like to know how long it took BoA to respond to you? The process is more than frustrating since my loan is owned by Fannie Mae, but it was originally with Countrywide and now BoA. I tried to modify with Countrywide (over 6 months ago), then my paperwork fell through the cracks when BoA took over. BoA just gives me the runaround and gave me bs that I was not qualified to refinance since my mortgage is upside-down, although the new government programs raised the LTV to 125%! BoA basically ignores struggling homeowners who are not behind or not on the verge of foreclosure.I finally contacted a housing counseling agency (HOPE hotline), who gathered my paperwork that I submitted during their required workshop, but that was back in August and I have yet to meet a real counselor to submit to BoA!I also contacted CCCS (over a month ago) who submitted my paperwork online and the only progress I see is that BoA has posted (online statement) that my workout letter was received. So it looks like I'm back in limbo with pending status. Almost at the end of my rope with this frustrating ordeal.
If anyone else has been successful in trying to modify their loans with Bank of America, please advise.
Thanks.
If anyone else has been successful in trying to modify their loans with Bank of America, please advise.
Thanks.
My mortgage is with Wells Fargo. I recieved my trial period paperwork and payment info in Aug. 1st payment was not due until Oct and last in Dec. they lowered my payments by about $500. I have made 2 one in aug and one in sept. and will make one in Oct. . since original paperwork said 3 rd and final payment was due in Dec. will they look at this to finalize and hope make perm. early or stick to original dates?
Hi rayst,
Your query has been replied in the given page:
http://www.mortgagefit.com/problems/modification-payearly.html
Please take a look at it. I hope it will help you.
Thanks
Your query has been replied in the given page:
http://www.mortgagefit.com/problems/modification-payearly.html
Please take a look at it. I hope it will help you.
Thanks
I've started a blog with my day to day experience trying to get a loan modification. I hope this helps!
californialoanmodification.blogspot.com
californialoanmodification.blogspot.com
I contacted my mortage company regarding the Home Affordability Initiative and they said I qualified for a Loan Modification. I completed the trial period successfully and they then send me a notice saying that I didn't qualify for the Homeowner's Initiative Loan Modification, but I qualify for their own Loan Modification which would merely reduce the monthly payment by $245 on my 380,000 condo in Southern California, but my new balance is $400,000. So they reduced my monthly payment, but am paying $20,000 for it in the end.
I don't know what to do. The property is only worth $200,000 now. I would much rather lose the home, ruin my credit and make sure I save up all the money i'll be saving while not paying the mortgage to put a nice down payment on a better and cheaper home. What's the big deal with credit anyway, when you have a good job and can pay cash?
Any advice for or against my decision would be enlightening. Thanks!
I don't know what to do. The property is only worth $200,000 now. I would much rather lose the home, ruin my credit and make sure I save up all the money i'll be saving while not paying the mortgage to put a nice down payment on a better and cheaper home. What's the big deal with credit anyway, when you have a good job and can pay cash?
Any advice for or against my decision would be enlightening. Thanks!