Over the last couple of years foreclosures have skyrocketed. With the massive drop in home values and the now strengtheningTruth in Lending ActpresLiberal Contract fro mortgage lenders, the foreclosure problem has become common place for millions of householders. HAMP (Home Affordable Modification Program) is a government led effort to help people keep their homes by reworking their mortgages into more affordable payments.
The government hopes that when all the modifications are completed, the number of hightsclosure will decline. If a family can’t make the payment, they just end up losing their home.
Here’s how a home modification works:
The goal is to qualify the homeowner into a three month trial period. If the homeowner makes the payment, they will actually be permanently modified.
The goal of a modification is to allow the homeowner to get back on their feet. The loan will be fixed at an interest rate that is not greater than 9% This will be considered one of three other standard fixed rate modifications. The third rate is either the interest only modification or the extreme forbearance.
If the home payments are not unaffordable, the homeowner will be considered for permanent modification.
If the payment is not made on time for three consecutive months, the homeowner will be considered for a short sale.
If that doesn’t work the homeowner is then considered for a deed/deed-in-lieu of foreclosure. This means that the bank takes the house back, with ownership transferred to the lender pending an acceptable offer.
Now, we all know that the real estate market has been sinking for almost a year with a double digit foreclosure rate.
That’s where the government has come in with a new program. They hope it will get the ball rolling and bring the foreclosure rate down. This will help keep families in their homes.
Here is the catch.
The government will give the bank Negotiations for reinstatement of the loan. That means that if you are in or close to foreclosure they can keep you in your home – until a fully amortized purchase is feasible or the house is worth less than the current loan balance.
And to make matters worse, there is a “loan forgiveness” provision. This means that they can forgive the late payments and penalties in exchange for a loan modification that would lower the payment to a more affordable amount. “Loan forgiveness” doesn’t mean free money, it is a loan reinstatement where the lender “gives up” some of their money (in the form of interest) because of financial hardship.
There is no 100% guarantee that the lender will accept your offer or it may not happen at all. Much of this negotiation will depend on what the lender and your mortgage company decides.
Is reading the loan modification terms and agreement proof that you qualify for a modification? Are lenders releasing some of their losses? Who knows.
Many lenders are simultaneously working on 2 different programs that make it hard to determine if a lender is truly trying to work out a modification agreement with their homeowner. Since so many banks don’t have a standard modification process it is very difficult to judge the quality of a loan modification company.
Because of this, homeowners do not have any real way to evaluate the success of their modification program.
Homeowners need to be aware that:
The lender is extremely busy trying to work a modification out with homeowners. It has become a fulltime job in many cases.
The lender gets paid $1500-$3000Tons of companies send mortgage companies some form of ” threatening letters that they will foreclose if the homeowner doesn’t make the lowest possible payment.” Because of this problem with communication, many lenders have simply chosen not to work on any loan workout with the homeowner. Each lender is different but homeowners need to take the time to find out exactly what their lender is looking for on a loan modification.
Many mortgage companies are choosing to hire negotiators to handle the negotiations. These negotiators are bombarded with so many applications, that they can often choose the best one. This can be a good thing. Just make sure you stand a good chance of getting set-up with the right negotiator. As a homeowner, you need to educate yourself in as many ways as possible before you speak with a modification company.
The lender is more apt to bend the truth when faced with a homeowner who is armed with knowledge and has made themselves knowledgeable about the loan modification process and how it works.
A homeowner can get a much better chance of getting a properly modified loan by:
It is important to educate yourself in as much knowledge as possible. That way, you will be able to speak to the lender in the best possible terms. You will also understand what you will need to do in order to qualify for a modification. Planning is the key to success.
Writing a compelling Hardship Letter.