Loan Modification

Can You Qualify for Refinancing?

October 5, 2010 1 Comment

In spite of the government-backed refinance loans that are becoming obtainable, many people cannot meet the qualifications for a refinance. When a borrower cannot qualify for a refinance the best remaining option to improve mortgage loan terms is usually for the borrower to seek a loan modification from their current lender. Sometimes the easiest and quickest way to ease overall monthly payments is by working on credit card debts.

What would disqualify you for refinancing in Arizona?

If you have had a late mortgage payment in the last 12 months – this means more than 30 days late.

If you have a credit score below 640. If you have credit issues you can try for a loan modification or we can give you some advice on how to improve your credit scores.

If the current value of your home is less than 105% of your first mortgage. This is if you don’t already have an FHA mortgage. If you do have an FHA loan we may be able to refinance you. If you have enough equity to cover your first mortgage, but not your first and second combined you may only be able to refinance your first mortgage.

If you do not currently have sufficient income to support your debts. This debt-to-income requirement doesn’t apply if you have a current FHA mortgage. However, if the combined minimum payments on your current debts/loans is more than half of your family’s pre-tax income refinancing is difficult.

If any of the above apply to you a refinance probably is not possible right now. However even if you can’t refinance into a new loan you can still seek a loan modification so contact us for advice about that.

A “loan modification” is the process in which a lender lowers your payments by some combination of reducing your interest rate or in some other way agrees to improve the terms of your current loan. The incentive lenders have to modify mortgage loans is that foreclosing on a borrower is a very costly proposition so keeping a borrower in the home is often a wise thing to do financially — especially if the borrower is “underwater” on the loan or owes more than the home is worth.

Unlike refinances, loan modifications are normally free if you can obtain one directly from your lender. With refinancing as with any mortgage there are fees associated with government-backed loans.

FHA Loan Refinances

Some people assume the government is the lender with FHA loans but that is not the case. FHA loans are simply loans that are backed or insured by the federal government. In other words regular banks lend the money but with an FHA loan it is like having Uncle Sam co-sign with you.

What are the fees involved?

Bank fees for FHA loans can range anywhere from about $1100 to $5000 depending on the size of the loan and the terms worked out. There are fixed fees that usually amount to about $1100 and then it is common for there to be a loan origination fee of at least 1% of the loan amount.

Title and escrow fees are fees charged by the title company and vary from state to state. It is common for these fees to tally $1000-2000. The larger the loan, the larger the title and escrow fees. Another cost are pre-paid items which are pre-payments on property taxes and homeowners insurance.

FHA insists that taxes and insurance be included in the escrow account and paid monthly. While these aren’t fees (since you are simply paying ahead on taxes and insurance) they do need to be added to the loan amount or otherwise paid in advance.

Finally, there is a 1.75% mortgage insurance premium that Uncle Sam requires in exchange for essentially co-signing on your FHA loan. This mortgage insurance premium (along with the mandatory monthly mortgage insurance fees) helps keep the FHA solvent and able to pay the banks back when FHA borrowers default on their loans. This fee does not apply to conforming loans refinanced under the Homeowner Affordability and Stability Plan.

There are some cons to going the loan modification route however. The modifications are sometimes temporary in nature. For instance the lender might lower interest rates for just a few years with the understanding the interest rate will revert back after that time. Lenders and loan servicing companies are under no obligation to modify your loan. They often choose to ignore or deny loan modification requests. Borrowers must normally be at least 30 days behind on mortgage payments to obtain a loan modification.

If you can qualify for a refinance you have more control over your situation. When you refinance into a 30-year fixed loan you don’t have to worry about terms changing over the life of the loan.

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Filed Under: FHA Loans Tagged With: Arizona Loan Modification, Arizona Refinance, AZ refinance, Loan Modification, refinance, refinancing in arizona

Short Sale, Trustees Sale, Loan Modification: Luck Is The Difference

June 27, 2010 Leave a Comment

Having short sold my house earlier in the year, I happen to be an expert on what it is like to short sell your house.

And I am an expert on what it takes to get it done.

And I have come to the conclusion that the difference between a short sale vs. a trustees sale is…

Luck.

But if you find yourself in the position where you are going through a trustees sale here in Arizona, here is a great video of someone else who has went through the same thing:

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Filed Under: Loan Modification Tagged With: Foreclosure, Loan Modification, Short Sale, trustees sale

Are Loan Modifications Working?

January 25, 2010 1 Comment

Are loan modifications working? Local Realtor Kristin LaVanway gives some commentary on whether or not loan modifications are working.

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Filed Under: Loan Modification Tagged With: Arizona Loan Modification, Loan Modification

Will Main Street Get A Bailout?

December 28, 2009 Leave a Comment

One of the common phrases I have heard over the last couple of years is “how come Main Street doesn’t get a bailout?”

And I have usually just shrugged and said that no one had called me to ask my opinion but as soon as I heard of it happening, I would be sure to keep everyone posted.

I just now caught the first whiff that the federal government *may* be taking action to “bail out Main Street”.

Bailing out main street could take any number of different forms, but the most probable form in my opinion would be some kind of mechanism that deals with the problem of Negative Equity – or where people owe far more than their home is worth.

From Bloomberg:

Dec. 28 (Bloomberg) — The U.S. Treasury Department’s expansion of its capital backstops for Fannie Mae and Freddie Mac may foreshadow a shift in the government’s mortgage- modification tactics, Keefe, Bruyette & Woods analysts said.

The Treasury announced Dec. 24 that the two mortgage- finance companies, which were seized by the U.S. almost 16 months ago, could tap an unlimited amount of capital for three years, up from as much as $200 billion each. The companies’ needs would be unlikely to exceed the prior limits “even in a stress case scenario,” Bose George and Jade Rahmani, the New York-based analysts, wrote in a report today.

“Given this outlook, we believe that the main driver of this significant change is the flexibility it gives the government to take more aggressive action to support the housing market, including potentially going down the road of allowing some form of principal writedown,” the analysts wrote.

Ok, so that doesn’t exactly mean that an announcement is imminent – but it is interesting to see what possible things may happen:

Shifting to principal forgiveness to cure so-called negative equity that makes borrowers more likely to abandon loans whose payments they can afford may prove more costly for Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, by sparking “another wave of delinquencies as people look at it as a rational choice” to default to seek the aid, George said in a telephone interview.

While you probably shouldn’t bet on some kind of formal principal reduction program coming out any time soon from Fannie Mae or Freddie Mac, if I have learned one thing in the last two years, it is this:

Anything is possible.

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Filed Under: Loan Modification, The Business of Mortgages Tagged With: Loan Modification, negative equity

Arizona Loan Modifications: Reader Shares Relevant Loan Modification Information

March 2, 2009 Leave a Comment

One of the great things about a blog is that from time to time, someone stops by and leaves a comment that can hopefully help others by sharing relevant information.

Here is a recent comment from Greg who is with http://loansettlementcenter.com.

Here is the exact comment he made on our post titled “Are Loan Modifications Real?”:

Check our site for actual modified loans. The trick is how much leverage the borrower has. If you have equity and can’t make your payments, you will absolutely NOT get a loan mod. Why should the bank modify your loan? Sell your house is what they’ll say, and the fact you can’t make a payment disqualifies you as well.

If you’re current with your payments, you do not qualify for a loan mod. Why? Because the Loss Mitigation Dept. is who modifies loans, and they will never seen your loan on their radar until after you are late on your payments — get it, they mitigate loss. If you’re current and on time, you’re an ideal customer and will never cross paths with the loss mitigation dept.

So you must be late on payments, which is something a lot of people just won’t do even if they’re stuck in a payment that will destroy them in the near future. Also, you must have leverage and understand that you are not be willing to employ it. If you are upside down in your home, try and find out by how much. If, say, you owe $100K more than your house is worth, you actually have real leverage and have a good shot at a loan mod. Eventually it will become a simple risk calculation for the lender(investor). If they take the house back in foreclosure, how much do they lose vs. lowering your rate and/or reducing principal. So the more they will tend to lose in foreclosure, the better your loan mod will potentially be. Simple. The borrower must demonstrate that he can make payments, though, or the investor wouldn’t bother offering a modification. The borrower should also explain why he was not able to make those earlier payments — hardship. So if the borrower is upside down, has high interest loans, but also can make a payment but just can’t afford his current payment, I absolutely love his chances of getting his loan modified.

For the rest of us stiffs out there, ask yourself what leverage you have and then try to apply it. But you have to be willing to stop making payments and make your move, which is risky and scary. And you better be pretty sure you have real leverage. I will only accept clients that are heavily upside down, either late or about to be late, know for certain that they must either modify their loan or soon lose their home, can show hardship that has caused loss of income, especially if they are late, but can prove that they can make a payment if the original was reduced. These clients will get a good loan modification. And if they’re in a high interest ARM, they’ll be glad to know that they’ll be modified into a fixed, often at wayl below market rates. We’ve had a loan modified to 2% fixed rate before.

So what leverage do you have, and why should the bank modify your rate? Come up with a compelling reason, and by compelling reason I mean it will be cheaper to modify your loan than to _____ (foreclose seems like the best answer). If you don’t have equity, I guess that’s something. It’s worth a shot if you’ve got about 10 or 20 man hours on your hands to call your servicer and try to get through the process. But the modification will always be a financial calculation that the lender makes. He will accept a loss of this much by offering you a mod over the larger loss that taking your house would be. I’m too tired to really make my point, I think.

Maybe some people that modify loans have another viewpoint? This is how I’ve always viewed it and used to modify loans for people, and I’ve never been wrong yet.

Greg, thanks for sharing!

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Filed Under: Loan Modification Tagged With: Arizona Loan Modification, Loan Modification, Loan Modification Attorney, Loan Modification Company

Federal Government Soon To Encourage Loan Modifications By Spending 100 Billion?

February 8, 2009 8 Comments

Will the federal government start backing loan modification programs en masse?

We could see a program where the Federal Government encourages lenders to modify loans as soon as this week.

This morning, White House Economic Advisor Larry Summers was on ABC News talking with George Stephanopoulos about the Economic Stimulus Bill that should get passed this week and an excerpt from their conversation about loan modifications is below:

STEPHANOPOULOS: Let me ask about that financial overhaul. Originally, Secretary Geithner was supposed to give that speech tomorrow. Administration officials are telling me it’s now more likely on Tuesday?

SUMMERS: Yes, I think there’s a desire to keep the focus right now on the economic recovery program, which is so very, very important.

STEPHANOPOULOS: So Tuesday it is. Let me show what’s been reported so far about the elements, the broad-based elements of what are in the plan that you’ve been working on with Secretary Geithner: a proposal to insure banks against more losses, as has already been done with Citibank; some kind of a facility to purchase the toxic assets, although that may be done through trying to encourage private investors to buy up the toxic assets; injecting more capital into the banks; increased lending by the Federal Reserve; and, of course, foreclosure relief for homeowners.

Are those the basic, broad principles inside the plan?

SUMMERS: You know, I’m not going to get into previewing Secretary Geithner’s announcement, but I can tell you this: The focus is going to be on increasing the flow of credit and doing it with transparency, with accountability for those who receive support, and with a kind of consistency that, frankly, we haven’t seen so far.

So, yes, there will be support for banks so that they remain stable, are in a position to lend. There will be support for the credit markets more generally. And absolutely critically, there will be support and pressure that assures that these needless foreclosures are avoided and that government is acting aggressively to contain the damage in the housing markets.

STEPHANOPOULOS: So it’s probably $50 billion to $100 billion in the package to prevent these foreclosures?

SUMMERS: The president’s made clear that he’s very committed to foreclosures. I expect that it will be $50 billion or more that will be directed at providing support for the housing sector of our economy.

STEPHANOPOULOS: And there was a — a report in the New York Times yesterday that this plan would not require banks to start — to start lending or to lend more. Is that true?

SUMMERS: The program will have — I’m not — as I say, George, I’m not going to get into describing Secretary Geithner’s program…

STEPHANOPOULOS: But that’s a pretty fundamental point.

SUMMERS: But he will be — he will be proposing a program that will make certain that we are stabilizing this system and increasing credit — credit flows, because that’s got to be — that’s got to be the objective to increased credit flows.

From the Washington Post this morning:

“Geithner is likely to roll out a plan, worth $50 billion to $100 billion, to encourage the modification of mortgages for homeowners who are otherwise at risk of being foreclosed upon. It could be based loosely on a strategy for foreclosure relief engineered by FDIC Chairman Sheila C. Bair when the FDIC took control of the failed bank IndyMac last year. Extensive details of how the plan will work may not be complete by tomorrow’s speech, however.

“Institutions that get assistance will have to participate in loan modifications and meet other standards that we set,” Geithner told the House Democrats yesterday, the sources said.”

Is the Federal Government going to really spend $50-100 Billion on loan modification programs?

We should know for sure by Tuesday.

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Filed Under: Loan Modification Tagged With: Arizona Loan Modification, Loan Modification, Loan Modifications

Loan Modification: Reader Comments on Loan Modification – What To Expect If You Are Not Late On Your Payments

February 4, 2009 1 Comment

We contribute to other blogs and one national blog that we contribute to is Zillow.com. Recently I wrote a piece titled “Loan Modification – What to expect if you are not currently late” and a reader who identified himself as “CK” left some really, really good advice as a comment, so I thought I would share it here as well:

Loan Modification: What to expect if you are not late on your payments

If you are current on your mortgage payment then consider refinancing with your current lender. You may qualify for a streamlined refinance (appraisal report not required). Right now is a great time to take advantage of the low interest rates, which may help reduce your monthly payment.

If you are behind on your mortgage payment and have an ability to pay then complete the financial information package your lender mailed to you. Usually you will get this package when you are behind 2 or 3 payments. Just like a refinance, you will need to qualify for a loan modification.

Here are some things which will cause you to be disqualified for a loan modification. Not a legitimate involuntary to pay (virtue does count), no ability to pay, uncooperative, and misrepresentation on origination or during loan modification process.

Realistic expectations if you qualify for loan modification. Lender will usually take your past due payments and other costs and roll them into your principal balance. To keep your payment from increasing b/c now you have have higher loan amount, lender will usually extend your term out, up to 40 years (keep in mind you are paying more interest over the life of the loan). In some instances interest may be lowered to either the current market rate or note rate; usually the lower of the two. Also keep in mind if you had an interest only loan, you now are paying principal and interest (fully amortizing loan) and mandatory impound account (taxes and insurance).

If you have a ton of unsecured debt (credit card, installment, etc) then its best to negotiate with them before you begin the loan modification process. Your bank or servicing is not willing to free up cash flow to pay unsecured debt. You will need to develop a good budget; there are many approved HUD counselors that will help you set up a budget for free (800-HOPE-NOW).

I hope this helps you and your family get back on track in these challenging times.

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Filed Under: Loan Modification Tagged With: Arizona Loan Modification, Loan Modification

Loan Modification: Before You Do Anything, You MUST Do This First.

February 3, 2009 Leave a Comment

Over the last year or so, I have personally spoken with more than 1,000 people about whether or not a loan modification was right for them.

Many of these people were not currently late on their payments, and were wondering if the loan modification process was “going to hurt” – meaning, was the outcome going to be worth the pain that they were convinced they were going to go through.

Is the loan modification process worth it?

I don’t know.

But I give one piece of advice to anyone who is thinking about trying to get a loan modification done:

Before you begin any part of the loan modification process, prepare yourself for the worst possible outcome.

If you do this, any outcome better than the worst-case-scenario will make it seem like a “win”.

If you know that the worst possible case is usually that you will have to go through a foreclosure and you prepare yourself for that, you will mentally be setting yourself up for a win.

If you set your expectations as being able to get your lender to write off $100,000 of your principal balance and give you a 1% interest rate for 30 years?

Get ready for heartache.

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Filed Under: Loan Modification Tagged With: Arizona Loan Modification, Loan Modification

Loan Modification: Are You Getting A Good Deal On Your Loan Modification?

February 3, 2009 1 Comment

I took a strange phone call today.

The caller explained how they had been working with their lender on a loan modification and had finally gotten their lender to propose a loan modification that would cut $60,000 off of their principal balance and reduce their interest rate to 3% for 5 years, then adjust it to 5% and fix it there for the remaining 25 years.

His question to me:

Am I getting a good deal on my loan modification?

At first, I didn’t know what to say.

Maybe? Yes? I don’t know?

These were the first three things that came to mind.

How do you know if you are getting a good deal on your loan modification? I think it may be impossible to set a “good deal on loan modification” standard because each individual loan modification is different than the others. How your loan gets modified depends on so many different factors – many of them unique to the individual situation.

Are you getting a good deal on your loan modification?

Here are 3 things that you can do to help answer the question of whether or not you are getting a good deal on your loan modification.

Ask around. See what other terms that people are getting on their loan modification.
Begin with the end in mind. If you know what will work for you before you start the loan modification process, you have a much better chance of feeling like you are getting a good deal once you achieve your initial goal.
Do your research on loan modification. Many people have success with the loan modification process and are sharing their experience.

No matter what you do – before you sign the final paperwork to get your loan modified — make sure you feel like you got a good deal on your loan modification.

Learn How To Do Your Own Loan Modification Without The Help of a Loan Modification Company

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Filed Under: Loan Modification Tagged With: Arizona Loan Modification, Loan Modification

Can You Qualify for Refinancing?

Loan Modification

FHA Loan Refinances

Short Sale, Trustees Sale, Loan Modification: Luck Is The Difference

Are Loan Modifications Working?

Will Main Street Get A Bailout?

Arizona Loan Modifications: Reader Shares Relevant Loan Modification Information

Federal Government Soon To Encourage Loan Modifications By Spending 100 Billion?

Loan Modification: Reader Comments on Loan Modification – What To Expect If You Are Not Late On Your Payments

Loan Modification: Before You Do Anything, You MUST Do This First.

Loan Modification: Are You Getting A Good Deal On Your Loan Modification?

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