House Refinance Center
Mortgage Loan Modification
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| The Truth About Mortgage Modification Home Affordable Modification Program (HAMP) was created to help homeowners who are facing financial difficulties with the payment of their mortgages, get a loan modification. The result of the modification should prevent foreclosure. Only your mortgage servicer will be able to tell you if you are eligible for a loan modification. However, you should carefully consider these facts.
2 Units: $934,200 3 Units: $1,129,250 4 Units: $1,403,400
If you have a first lien, as well as a junior you can still apply. However, the modification applies only to the first lien. Before you contact your mortgage servicer, have your paperwork in order. These documents include:
Remember that you do not have to pay a loan modification fee or a past-due late fee if you are behind in your mortgage. Borrowers who are behind in their mortgage payments and are having financial difficulties seldom have extra funds. If you are behind in taxes, your servicer might offer you the option of adding the amount to the new modified loan, or paying the amount upfront. Borrowers are encouraged to contact a HUD- approved housing counselor to help them understand all their options and to create a viable budget plan. The number to reach a counselor is 1-888-995-HOPE (4673). If you have already missed one or more mortgage payments and have not spoken to your loan servicer, call them immediately. HAMP expires on December 31,2012. |
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| Bank of America Feeling The Heat From Defaults More homeowners are walking away from their mortgages. The numbers are much greater than the bank had expected. More than 31% of foreclosures in March were deemed to be strategic defaults. When you add the thousands of homeowners that have stopped paying their mortgages but are still living in the house, we have a tsunami. However, we must give credit to Bank of America for identifying the problem and for being proactive and aggressive on loan modifications. This is exactly what the administration wanted from the Home Affordable Modification Program. The bank is willing to attack principal reduction head on. This is before messing with lowering the interest rate, and playing with extending the term of the mortgage. Why is the bank stepping up now and doing something meaningful? Profit. The bank has come to the realization that homeowners are living rent free for over 14 months. The bank is not getting a rental payment or a mortgage payment. And to make matters worse they are stuck with paying the fire insurance and the property taxes. You definitely would not want these to lapse. What does all this mean to a homeowner who has a mortgage that is underwater? Make sure all your paperwork is in and that you are seeking a loan modification. Then wait for the bank to contact you with a deal. If you decide to stop paying the mortgage, save the mortgage payments you will need this money later. And finally, seek legal advice from a qualified real estate attorney. You need to find out if your mortgage loan is a recourse loan, or a non-recourse loan. You also need to establish whether or not you have to pay income taxes on any part of the loan that is forgiven or canceled by the bank. |
| FHA Short Refinance A new mortgage program was unveiled yesterday by HUD. The FHA Short Refinance will help homeowners who are underwater on their mortgages. The program starts on September 7, 2010 and will allow qualified homeowners to refinance into an FHA mortgage. Homeowners must be current on their mortgages. And the existing lender must agree to reduce the outstanding mortgage balance by at least 10%. The FHA Short Refinance is available to homeowners who do not have an FHA loan. The loan to value when reworked, can not exceed 97.75% of the current home value. For transactions that have a second lien, The FHA will ask the second lien holder to resubordinate. |
| Too Many Trial Loan Modification Being Canceled Under HAMP Trial loan modifications under the Home Affordable Modification Program continued to be canceled at alarming rates. For data up to July 2010, active trials were 255,934. However the cumulative cancellations were 616,839. Upfront verification of borrowers document is one of the reasons the cancellation numbers are so high. Another reason is the failure of borrowers to make the mortgage payments during the trial period. Even with the modification, borrowers are still finding it difficult to make ends meet. The median back-end (DTI) after the modification is at a staggering 63.5%. Not many homeowners can stay afloat for a long time with such a high DTI. Lumped into the cancellation figures are borrowers who were ineligible because they already had a debt-to-income ratio below 31%. Maybe the Treasury will do a better job in the future and give us a break-down of the reasons for cancellations. The permanent modifications are providing relief for thousands of homeowners. In July there were 37,000 permanent loan modifications. This translates into a payment reduction of 36% or more than $500 per month. HAMP guarantees a lower mortgage payment for the first five years. The total active permanent modifications were 421,804. Since the program began there have been 12,912 permanent modification that were canceled. Eligible delinquent loans stood at 3,076,060. While the eligible delinquent borrowers were 1,456,363. These numbers confirm what many experts were saying for the last year, "HAMP has to do more". |
| Bank of America mortgage modifications slow Bank of America government backed mortgage modifications were slow in August. BofA completed only 3,600 permanent loan modifications under the Home Affordable Modification Program. BofA completed 10,000 modifications under its own bank origination program, bringing their total to about 600,000. The total modifications under HAMP is only 79,800. There are over 72,000 trial modifications in the pipeline for August, down from 84,700 in July. Hopefully, this should keep the permanent modifications over 3,000 each month. There is definitely a slow down in permanent modifications, both under HAMP or under lender sponsored programs. There are several reasons for the decrease in modifications. In April, the U.S. Treasury began asking lenders to obtain full documentation of a borrower's financial position. The change slowed the number of approved loan modifications. In the past, banks would take some of the information verbally, or not at all. This practice has lead to a high default ratio. The concern we have is the gap in modifications between HAMP and bank sponsored programs. How can the Bank of America complete over 600,00 mortgage modifications using their in-house program, and only complete 10,000 under HAMP? Bank of America still remains the industry leader in mortgage modifications. BofA is also leading in the recently introduced second lien modification program (2MP) as well as HARP. |
| The Modification Runaround When it comes to "runaround" the banks are tops. They lose your documents. Every time you call you get a different person. When they do find your papers they claim that they are outdated, and you need current information. You often get disconnected and have to listen to boring music for about an hour or two. Watch the above video. |
| Foreclosure Prevention Counseling Ask for help if you fall behind in your mortgage payments. There are HUD approved counselors. Don't be ashamed, you are not alone. Watch the above video. |