With the economy in the shape it is, a lot of people need help in obtaining a loan modification or pursing other steps to avoid foreclosure. But while there are a variety of resources to help at-risk borrowers with their mortgages and hold on to their homes, many of them are too intimidated to take advantage of them.
According to Consumer Credit Counseling Services of Atlanta, an affiliate of one of the nation’s largest nonprofit credit counseling agencies, many borrowers who need help with their mortgages don’t seek it because they’re uncertain how to proceed or just too intimidated by the process.
“Fear often prevents many consumers from seeking help,” said Michelle Jones, senior vice president of counseling for CCCS of Greater Atlanta, Inc. “Overcoming these fears can mean the difference between staying in your home and losing it.”
The agency cites six primary issues that can prevent homeowners from seeking help when they are atrisk of losing their home to foreclosure. They are:
Accelerated foreclosure
Some borrowers are concerned that if they let their mortgage company know they’re having financial problems, the lender will simply act faster to put them in foreclosure. But in reality, lenders don’t want to foreclose unless they have to – it costs them money. Letting your lender know as soon as possible that you’re in financial difficulty can provide them more time to help you work out a solution, as well as allowing you to work out a repayment plan or loan modification before you’ve fallen too far behind on your loan.
Embarrassment
At-risk homeowners may be embarrassed to admit they’re in financial difficulty and need help. However, in the current economy, lots of people are struggling to get by. Most people already have multiple friends and family members who are either unemployed or facing foreclosure themselves. It’s not an uncommon situation these days or one that carries much of a stigma right now.
Toughing it out
Some borrowers think they’re better off doing every possible to manage the situation themselves before seeking assistance. Often, homeowners in financial trouble may end up draining their savings account, selling stock they inherited or tapping into their IRA or 401(k) account before they even think of contacting a credit counselor or applying for a loan modification. But once their financial reserves are drained, they have far less room to maneuver, making it that much harder for them to work out a successful modification or repayment program.
Hopelessness
Sometimes, they think nothing can be done. Many homeowners believe that once you can’t keep up with your mortgage payments, that’s it. End of the story. What they don’t realize, however, is that there may be options that never occurred to them and that they won’t know about unless they seek help, either from their lender or a certified credit counselor.
Fear of fraud
Many people are afraid of getting scammed. With all the news reports and government warnings about rip-off artists who charge huge fees for “foreclosure rescue” or loan modification services, it’s no wonder that many at-risk borrowers are leery of seeking help. However, there are many nonprofit agencies, certified by the Department of Housing and Urban Development (HUD), with trained credit counselors who know the ins and outs of the mortgage business and loan renegotiation, whose services are available for minimal fees.
It’s too late
One they’ve already been rejected by their lender for a loan modification, homeoweners may think there’s nothing more they can do. However, there may still be other options available or the application could be modified to help the borrower to qualify for a loan modification under the standards of the government’s Making Home Affordable program.
The key thing for any homeowner at risk of foreclosure is to seek help before it’s too late, preferably before the situation becomes dire. Contact information for HUD-certified credit counselors is available on the HUD web site.
Getting a mortgage loan modification can be a big help when you’re in tough financial straits. However, the mere fact that you’ve been able to get a loan mod may not by itself be enough to ensure that you can stave off foreclosure.
Getting a mortgage loan modification can be a big help when you’re in tough financial straits. However, the mere fact that you’ve been able to get a loan mod may not by itself be enough to ensure that you can stave off foreclosure. You have to get a good one that suits your circumstances.
According to the U.S. Office of the Comptroller of Currency, 55 percent of all loan modifications performed in early 2008 were back in default (at least 30 days past due) within six months of the modification. A full third were at least 60 days delinquent. Not very good odds, is it?
Part of the problem, according to credit counselors, is that many loan modifications aren’t very well designed for long-term success. Lenders may offer new terms that give the homeowner an opportunity to get current on their loan, but with payment schedules that leave the debtor with little margin for error. Often, a loan modification doesn’t even reduce a homeowner’s monthly mortgage payments – in fact, it may even increase them. Though some banks will modify a loan by simply tacking the past due balance, or arrearage, onto the end of the loan, others will simply pile it on top of the current monthly payments as a series of additional payments over the coming months or years.
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Of course, if you’ve been having trouble making your mortgage payments already, trying to make a higher monthly payment could be well-nigh impossible, unless the reason for default is a temporary financial setback that has now passed, such as an illness or layoff that kept you from working.
Not all loan mods are set in stone
If you’re applying for a government-backed Making Home Affordable loan modification, most of the terms, including a reduced monthly payment, are mandated by the program rules. But if you’re working out a private modification directly with your lender, there’re several things that improve the chances that your loan modification will be a long-term success, and not simply delay foreclosure for a while longer. Among them:
Don’t automatically accept the first set of terms your lender offers. Some people are so desperate to avoid foreclosure, they get in a panic mode and jump at the first thing their bank or loan servicer offers, said Rich Korn, a certified foreclosure intervention counselor with Consumer Counseling Credit Services in Columbus, Ohio. Often, mortgage holders can get better terms if they come back with a counteroffer.
Work with a certified credit counselor. A credit counselor with a HUD-endorsed or other certified nonprofit credit counseling service can be a big help in working out a loan negotiation with your lender. Not only do they know and routinely work with the people in a position to authorize loan modifications at various lenders, they also tend to have a pretty good idea of what sort of terms you can get and can help you in preparing counterproposals to offer your lender. They can also assist you in going over your finances to help you identity what sort of monthly payment you’ll need to be able to maintain your mortgage payments on a long-term basis.
Also, make sure that you’re working with a certified credit counselor and not a so-called mortgage rescue service that charges large fees up front for their services and frequently fail to deliver. If you’re asked to pay a large fee in advance, look elsewhere.
Seek a lower monthly payment. This may seem obvious advice, but the majority of loan modifications actually either increase the debtors monthly payment or leave it unchanged. Both are far more likely to end up with a redefault than a loan mod that lowers your monthly payment. According to the U.S. Office of the Comptroller of Currency (OCC), reducing monthly payments by 10 percent or more cuts the likelihood of a new default over the next six months in half.
You won’t have to worry about this if you’re getting a Making Home Affordable loan modification backed by the federal government, because that program requires reducing monthly mortgage payments to 31 percent of the homeowner’s monthly income. But if you’re working out a private loan modification with your lender, you may have to push them to restructure the loan so that you get at least a temporary reduction. This is one place where a credit counselor can be of assistance.
Act early. The OCC reports that loan modification success rates are linked to how soon homeowners obtain a loan mod after getting into financial trouble. Homeowners who plan ahead and are able to obtain a loan modification before defaulting on their mortgage payments are 12 percent less likely to default than those who obtain loan modifications after missing two mortgage payments, who in turn are less likely to default than those who’ve missed three or more.
Some breathing room. One thing that can make a big difference is to negotiate a delay of one or two months before resuming mortgage payments, with the missed payments tacked on to the end of the loan. What this does, according to Korn, is enable the borrower to address some other late debts and possibly build up a bit of a reserve for handling unexpected expenses that inevitably crop up.
Account for your entire financial picture. Homeowners often fail to account for all the expenses they need to meet when figuring out what sort of modified mortgage payment they can afford. Unexpected car repairs and medical bills, infrequent but regular expenses such as back-to-school purchases and insurance premiums, all can eventually derail a loan modification payment schedule.
Your mortgage is held by your loan servicer. Most mortgages are packaged and resold on the secondary market to investors, and your loan servicer merely processes your payments and manages the loan. But if you’re lucky enough to be among the small percentage whose mortgage is still held by the original lender or by your servicer itself, you have a 70 percent greater chance of staying out of default six months after your loan modification, according to the OCC.
Apparently, servicers have more flexibility in modifying loans held on their own books than they do on loans owned by others, in which they’re often restricted by contractual obligations. There’s nothing you can do to change this one, but if you do have a mortgage held by your servicer, it’s a good thing to know going in.
Remember, if your loan modification isn’t going to work out over the long-term, it’s really not doing you any favors. In fact, a poorly designed loan modification could cause you to continue pouring money into a property you eventually won’t be able to retain, money that would be better used getting back on your feet in a rental home. But if you can demonstrate to your lender that a well-designed loan mod will significantly increase the likelihood that you’ll be able to keep up with your payments, you’ll both be better off in the long run.
Are you one of the lucky ones who’s been able to lower your monthly mortgage bills through the government’s Making Home Affordable (MHA) Program? Well, you may not be out of the woods just yet – lenders are reporting that large numbers of borrowers who obtained trial loan modifications under the program are being turned down for permanent status at the end of their trial period.
So what’s happening?
The lenders point to a variety of reasons. Some borrowers simply fail to make their payments during the three-month trial period on time or miss payments entirely. But an even bigger reason, lenders say, has to do with documentation – problems with the paperwork borrowers must submit to support their application for a permanent loan modification.
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How serious is it?
According to Molly Sheehan, a senior vice president with Chase Home Finance, her company has offered nearly 200,000 trial loan modifications to date under MHA, but only 4,300 of those have been converted to permanent status (roughly 12,000 more have been approved for permanent status).
Documentation is biggest obstacle
Of trial loan modifications completed by Chase customers in the program’s first six months (April-September), she said that 51 percent – more than half – could not be approved for conversion to permanent modifications due to documentation problems. Another 29 percent were rejected for failure to make timely payments. Only 20 percent successfully completed their trial periods and submitted proper documentation that allowed them to be approved for permanent status.
Similar figures are being reported by other lenders. Bank of America reports that, of 65,000 trial modifications is has extended that will be eligible for conversion to permanent status as of Dec. 31, 2009, 50,000 still lack full documentation or have discrepancies that would prevent them from being made permanent under the rules of the program.
Many borrowers, on the other hand, are complaining of being given incomplete instructions by their various banks or being asked to resubmit the same documents over and over. Regardless, it seems clear that documentation problems are a major obstacle preventing borrowers with trial loan modification from having those modifications made permanent upon completion of the three month trial period.
Common documentation problems
So what can you do to avoid such problems if you’re currently in a trial loan modification or looking to be approved for one? Here’s some of the more common reasons that trial loan modifications were denied for conversion to permanent status, according to Chases’ Sheehan:
If you’re currently in a trial modification or hoping to be approved for one, there’s a few particular things you can do to avoid problems.
Make copies of all documents you submit and include a cover letter listing each document contained. Ask for verification that all documents were received. Then send them by certified mail, Federal Express or similar means. This not only guarantees delivery, but provides you with the signature of the person who received your materials if the lender ever claims they didn’t receive them.
Send all your documentation at one time, unless asked to submit additional material. Sending items separately as you obtain them is a good way to get them separated and scattered.
Make sure you’re sending your documents to the right office at your lender. The person you talk with on the phone about setting up your trial modification or which documents you need to submit may not work in the office you need to submit your materials to. Make sure you get the right address.
Also, make sure you’re dealing with the right office when contacting your lender. Loan modifications are handled by the loss mitigation department – not collections or mortgage servicing.
When calling about a loan modification or document requirements, if the person you’re talking to doesn’t seem to have a full grasp of the subject, ask to speak with a supervisor. Some lower-level employees and new hires may not be fully up to speed on the program.
If you believe you have fully met the terms of the trial loan modification and properly submitted all documentation, but are still turned down for a permanent modification or cannot get a definite answer on when you will be approved, write your senator and congressman and tell the lender you are doing so. It is unlikely they will intervene, but the outside possibility and fear of attendant media coverage is often enough to get a lender to act.
Income must be accurate
Finally, when first applying for an MHA loan modification, avoid the temptation to misstate your income to improve your chances of being approved or get better terms. Although applications for MHA trial modifications are much like “stated income” loans – proof of income is not always required – you will have to document your income before your trial modification can be made permanent. And if there’s a significant discrepancy – either too high or too low – you could either be denied a permanent modification or have to begin the process all over again. So give the most accurate information you can at the front of the process.
NEW YORK (CNNMoney.com) — In a sign that more foreclosures could be on the horizon, 23% of people with mortgages owe more than their home is worth, according to a report released Tuesday.
Almost 10.7 million U.S. mortgages were “underwater” as of September, said research firm First American CoreLogic.
Another 2.3 million homeowners are within 5% of negative territory, the report said. The two figures combined comprise almost 28% of all residential properties with mortgages.
If you’re a homeowner and you’re in foreclosure, you will most likely want to know your rights. Unfortunately, you have very few rights outside of what is allowed by your state’s laws and these laws primarily deal with specific time frames that a lender must follow during the foreclosure process.
Understanding your states laws and the time frames allowed under them, will give you the information you need to make an educated decision about the best way to proceed.
Many websites offer various free foreclosure help and describe the various states law’s.
After you have stopped making your mortgage payments for a period of time (typically 90 days or more) that is usually when your lender will start foreclosure proceedings with the court. The purpose of this is to follow your state’s laws in order to take complete ownership of the property which serves as collateral on your mortgage that you are defaulting on.
At this time (depending on your state) a notice of default or NOD will be filed. Your lender must provide you with a written notice of that intention. Please keep in mind that you can still contact your mortgage servicer and work out some type of loan modification at this time and you also have the right to pay back all past due amounts along with the late fees and other penalties.
Throughout the foreclosure process the homeowner has the right to be treated fairly. Any money that is earned on the sale in excess of the amount owed on the mortgage, late fees, penalties and foreclosure costs should go to the homeowner.
What you need to know!
Simply calling your lender and getting a loan modification or paying all past due amounts can stop the foreclosure process, but not always. Be careful because the foreclosure conveyor belt rarely stops moving and it’s not over it’s over. Many times homeowners are amazed that they end up losing their homes when they have been trying to obtain a loan modification for months. Unfortunately, they were under the false assumption that the process had stopped, when in fact it never stops!
I am not an attorney and this is definitely a legal situation, so it is best to contact an qualified attorney in your state that can help your or at least guide your in the right direction.
Have you ever heard of redemption? I have and I believe in it 100%. Good news is that is about 50% of our great nation’s states agree with me. This is a statutory right that allows you to regain ownership of your home by buying it back after the property has been foreclosed. Usually, this right must be exercised within 6-12 months of the foreclosure sale.
Sometimes, foreclosure is inevitable. However, the unpleasantness of the experience can be minimized if the homeowner is aware of his or her rights.
Here is the most complete list of links to free government help to stop foreclosure anywhere on the internet.
Home Affordable Modifications
If you can no longer afford to make your monthly loan payments, you may qualify for a loan modification to make your monthly mortgage payment more affordable. Millions of borrowers who are current, but having difficulty making their payments and borrowers who have already missed one or more payments may be eligible.
All the below links are official government websites or HUD approved non-profit housing counseling agencies.
Can’t get the help you need and deserve? FIGHT BACK!
Department of Housing and Urban Development
Department of Justice (DOJ)
Federal Housing Administration(FHA)
Federal Trade Commission (FTC}
Internal Revenue Service (IRS)
Office of the Comptroller of the Currency (OCC)
YES, More Loan Modification Help!:
A loan workout is an agreement that is negotiated with your current lender that changes the terms of your current loan. Lenders are willing to negotiate when borrowers are facing financial difficulties and can’t obtain other financing alternatives. You must show the lender why it would be in the lender’s best interest to agree to a workout arrangement. If convinced, a lender may be willing to reduce the loan interest rate, reduce monthly payment amounts or change other loan terms.
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A loan modification generally occurs where the parties to a problem loan mutually agree to workout the problem by creating new and better loan terms. The hope is that the new loan will enable to the borrower to meet their obligations.
When applying for a loan modification, make a game plan on how exactly you are going to approach them. These people are trained in minimizing loss for their company and they get paid to by getting the most amount of money out of you as possible or declare that your case is un workable and foreclose on you. That is how they mitigate loss. If you understand this, then you’ll know that you have to approach them and all conversations very carefully. Everything can and will be used against you.
[youtube]http://www.youtube.com/watch?v=PnGqRcn476U[/youtube]
Items You Will Need When Applying For a Loan Modification:
Document income and expenses. Keep all correspondence (even the envelopes) Before negotiating a deal, gather all the information you need, starting with any correspondence from your lender. That includes anything that you have unopened from the lender. Don’t throw away envelopes from the servicer — postmarks sometimes can make the difference between being eligible or ineligible for relief.
Collect everything that relates to income and expenses. Find your last four pay stubs. They want to see at least one month of income. If your income is very sporadic, the support your story by showing how you’re getting paid so we can calculate an average over time. Gather at least three years worth of W2s and tax returns, plus three to six months of bank statements. Find all the mortgage paperwork and add that to the file. Pull together all bills, paid or not, from the times you were falling behind on the house payments until now. Include utilities, auto payments, credit cards, student loans, child support, medical bills. Find the winter and summer heating and cooling bills. You need to also include everything that documents why you fell behind. An employer’s notification of reduced hours or a layoff, an invoice for an auto repair or a furnace replacement, a shutoff notice from a utility.
What to Do When You Call Your Lender:
Your lender has two platoons of employees who talk with delinquent borrowers. The first is the collections department, which consists of people who try to pry money out of you and get you current on the payments. The second group consists of the loss mitigation specialists. These departments go by different names, depending on the servicer, including foreclosure prevention, loan resolution and delinquency customer service. We’ll use the most common name for the department: loss mitigation, or loss mit. It can be difficult to get through to the loss mitigation department if collection agents are discouraged from transferring calls. This is one of the benefits of having a helper, such as an attorney or a housing counselor. The first will intimidate bill collectors and the second might have contacts within the loss mitigation department.
[youtube]http://www.youtube.com/makinghomeaffordable[/youtube]
The trick with any bank and getting a work out done is learning to navigate their phone system so as to increase your chances of getting a live person. Over the years I’ve learned some tricks that help, sometimes you hear options that you know will lead to a person like when it says “to speak to a representative press ___” but sometimes they don’t give you these options. So, you have to think, what options WOULD get a live person. For example often anything that involves new clients signing up will get a live representative…because they always want new business. You have to be a little savvy though; you can’t just tell the sales guy you called them so you could get a warm body to answer the phone!
Once you get a live person, you want to be working your way up to a decision maker. This is sometimes harder to do for a homeowner than a 3rd party. Often with the homeowner they get stonewalled at the first level, and sadly the first tier in Loss Mitigation is really a glorified collections department. They are paid hourly employee’s who have very little if not zero motivation to go the extra mile and help you get some needed comfort and relief while resolving your problem. Often they just compound the problem by being rude and demanding, telling people things like “just pay your bills”. So it’s essential that you get beyond these people and to a specialist.
Sometimes to get to this point you have to put up with the hourly employee’s through a process of filling out their forms and information. Providing them with items such as pay stubs, tax returns and a whole host of financial information. Once everything is provided, then some lenders will assign the file to someone higher up in the loss mitigation department.
The MOST crucial element to this whole process is your Budget and if you have done your due diligence, you’ll be ready . They will ask you for a detailed list of your monthly expenses. If it’s too tight, you may not get approved, if you have too much extra income you are going to have an outrageous payment plan. Don’t agree to it!
The 2nd MOST important thing you can do is DO NOT SPEND YOUR HOUSE PAYMENTS. Often people stop making their payment because they are falling behind on other bills, or they can’t quite make the whole house payment. Over the years more often than not, the people I met with still have an income coming in each month, they just can’t meet all their obligations, so while the house is falling behind they take advantage of the fact that they aren’t paying the house payment in order to catch up on other debts. THIS IS NOT WISE AT ALL. Sock away as much of that money each month as you can. Its crucial, here’s why;
If you don’t pay your mortgage for 3-4 months and your lender decides to negotiate a repayment plan or a loan modification, then they will want what is called “good faith” money for you to come to the table with. Typically this is from 30-75% and sometimes 100% of what you owe in delinquent fees and attorney fees. Often I speak with homeowners who spend all their money and have nothing to work with. If that is the case, then don’t expect them to work with you or you better have a REAAAALLLY good explanation and proof as to why you have no money to bring to the table.
We all know life throws curve balls at us, it’s the nature of the game, and you’d better just expect it, because it’s coming in one form or another. Whether it be a car breaking down, an illness, injury or death. An accident in a car, you just don’t ever know and it’s ALWAYS a good idea to have a rainy day fund. The crazy thing about going into foreclosure is that you can actually come out of it better off than you went in sometimes.
Is it Better to Just Walk Away and Start Over?
Many homeowners are just in over their heads. Many they love their home and their family does too. But what good is it when you are so stressed out that you cannot enjoy your home. You’re maxed out and you don’t have a dime to take the kids for an ice cream or the movies. That’s no way to live. This is a serious time to really sit down and see if it’s all really worth the stress and heart ache. If it’s not then maybe it’s time to just throw in the towel and down size. Get something you can afford and enjoy. Just close the door on this time in your life and move on. Sure, it will affect you for years, but place your health and well being before making a house payment. If this is you, you’re not alone. Think about it. Is it all really worth the pain and stress? You’re already down, maybe it’s time to just move on and take that money and get a nice little place to rent and regroup.
By saving up your payment for 2-3 months or more depending on the foreclosure time line in your state, you can not only have enough to put together a really nice plan with your lender, but also have some in the bank for a rainy day or worse case scenario, a rental. Often payment plans with the bank can be pricey and very short terms, like 6 months total to repay what you fell behind on. The people if have worked with who took my advice to save up and keep some funds in the bank, were successful 100% of the time at keeping their home. Because they were prepared for life’s curve balls. Even though they had fallen behind in the past, if they had an expense one month, they just pulled a little from the slush fund in the bank to help supplement their house payment that month.
The Lender Has Made You a Deal, What Now?
Respond to your lender, but don’t be rushed into making a promise that you can’t keep. Before making a deal with your lender, describe your situation to an attorney, accountant or a knowledgeable mortgage person. You need to make sure that it is reasonable and not an agreement that will stop foreclosure for a month or two.
Many lenders are likely to offer forbearance. Theses are only good for a short term band aid and not for the long term. Most commonly, this entails adding a set amount to each month’s payment. A forbearance plan can go as long as 36 months. But many are set to fail and are completely unreasonable for borrowers to pay back. Usually this will require placing the delinquent amount on top of your monthly mortgage payment. If you had trouble making your mortgage payment before, good luck paying your new larger more unaffordable payment.
If all else fails, seek out a third party to handle this for you. There are many non-profit housing counselors, attorneys and for profits that are very experienced in loan modifications and loan workouts.
Plan to arrive at an agreement, but prepare for the unwelcome news that you’ll have to move out. If you turn over the deed in lieu of foreclosure, or agree to a short sale (in which the lender lets you sell the house for less than the mortgage balance), or are forced out in a foreclosure action, you’ll need to consult a lawyer and maybe an accountant.
Don’t give up and fight to stop foreclosure and save your home! If all efforts fail, it’s not the end of the world. Just make sure that you mitigate loss to you and do your best to save what little credit you have left.
The Federal Housing Finance Agency (FHFA), conservator of Freddie Mac and Fannie Mae (the Enterprises) has established its final housing goals for the Enterprises in 2010-2011. FHFA is required by the Housing and Economic Recovery Act of 2008 (HERA) to set such goals for targeted segments of the mortgage market The new rules establish three goals for single-family, owner-occupied home purchases; o
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