Mortgage Help

REFINANCE

If you have enough equity, good credit and income, you may be able to qualify for a refinance.  But what if you don’t have enough equity or owe more than your house is worth.  Well, you may be surprised to learn that you might still be able to refinance.  In order for this to work, your current lender will need to approve the payoff for “less than the amount owed”.

Banks are sometimes willing to take a smaller loss now if it means that they can keep the property from going into foreclosure.  The problem here is that to qualify for the refinance, families typically cannot be behind on their mortgage payments.

LOAN MODIFICATIONS

The loan modification is a process whereby the lender will change the terms and payment on your loan, due to financial hardship.  This used to be an uncommon event, but with the Housing Crisis we are experiencing today, it has become much more common.  The loan modification process is one of the most convoluted processes imaginable.  Each lender has its own standards and procedures that change on a daily basis, and from person to person.  To make matters worse, when calling the bank homeowners will hang on the phone for hours, never speaking to the same person twice, and when you do talk to a live person, you have to retell your story again and again.  What is never mentioned is that each negotiator for the bank has from 500-700 files that they are working on at the same time.  Most families NEVER get help, and many end up just that much closer to foreclosure.

The process for getting a loan modification is supposed to be pretty straight forward.  You accumulate the documents that the lender requires and fax them to the bank. This includes an accurate monthly budget, income documentation, a hardship letter and any other records that might be needed.  (Most often, these documents are lost, so expect to be faxing them again and again.)  The lender will review the documents and make a decision.

If only it were that easy in reality.  Families are being told that they must be behind on the mortgage (they want you to consume your money resources staying current) before a loan modification can be started.  So the homeowner will deliberately miss payments at the lender’s insistence.  Then when the mod process is started, many lenders will reverse course and tell the homeowner that they must be caught up on payments before it can go forward.  In the meantime families have had their credit trashed, grown increasingly frustrated and eventually give up and now find themselves having their home foreclosed on.

The reality is that the “Banks” have no intention of granting a loan modification.  They know that most approved modifications end up in foreclosure anyway.  They are just trying to squeeze as much money out of hardworking families as they can.  Despite government intervention, banks are failing miserably.  (Link to “Report find Bank of America, Wells Fargo lagging on mortgage aid program”)

FORBEARANCE

Forbearance is a Lender’s decision not to exercise a legally enforceable right against a borrower in default, in exchange for a promise to make regular payments in the future. For example, a mortgage lender will agree not to initiate foreclosure proceedings against a mortgagor whose loan is in arrears. 

There are many forms of forbearance including:

1. Taking delinquent payments (frequently including penalties and bank costs) and adding that amount to the principal mortgage balance and re-amortizing the mortgage.  This can cause monthly payments to increase.
2. Dividing the delinquent payments by, for example, twelve and adding that amount to the next monthly payment for a year.  Thus increasing your monthly payment.
3. There are many more forbearance alternatives, most of which increase your monthly payment and do nothing about the fact that your home may be over mortgaged.
4. Most homeowners who exercise this option do so out of the desperation of trying to keep their home.  The bank provides forbearance out of a desire to get as much money as possible before default.  Most homeowners do not gain or stick with the forbearance plan.

For a no obligation evaluation of your options in order to make an educated decision that is best for you and your family, please click the link below:

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