The latest hot topic in the real estate business is Loan Modifications. Homeowners need to be very cautious because a lot of unscrupulous businesses are springing up that offer consumers help with their loan modifications. They charge homeowners a pricy fee of $3,000 or even more to do what you can do for yourself.
I've heard some folks claim that lenders are intentionally making loan modifications confusing. Some think it's an effort to discourage applications. If you're considering a loan modification, the first thing you should do is pick up the phone and call your lender to find out if you qualify. If you do not qualify, and can no longer afford to make your monthly mortgage payments, then perhaps you could consider a short sale, which is something I can help you with. Give me a call and we can see if it is a good solution for you. Many lenders are placing a moratorium on foreclosures, so this will give us some extra time to get your home sold.
The criteria for a loan modification is tight. Many banks insist on the following qualifications:
- Existing loan origination date prior to Dec. 31, 2007
- Existing subprime loan (fixed or adjustable) or Option ARM
- Loan-to-value ratio above 75%
- Owner occupied as primary residence
- Employed homeowner
- Existing mortgage payments exceed 31% of gross monthly income.
If you qualify for a loan modification, here is a list of the typical documentation you need to provide to your lender:
- 2 years of W2's
- 2 years of tax returns
- Financial Statement that lists assets and liabilities
- Last 2 pay stubs
- Hardship letter
Don't pay a company to do for you what you can easily do for yourself!
If you are successful, a loan modification may give you:
- A lower mortgage balance.
- An interest rate between 2% and 4%.
- A loan term of 30 to 40 years.
- A low monthly mortgage payment.
- Elimination of negative amortization and a waiver of prepayment penalties and fees.
If you have any questions please give me a call. I will do whatever I can to give you the information and support you need to achieve the best possible outcome.
Janna Rankin Scharf, AB, GRI, CSP, CNS, CLHMS, provides a superior level of real estate services to home buyers and sellers in Coeur d'Alene and Kootenai County, Idaho. Visit www.JannaScharf.com to search for homes in the Coeur d'Alene MLS for anywhere in spectacular North Idaho.
Janna Rankin Scharf, 208.651.9700 NorthIdahoJanna@gmail.com
Janna Rankin Scharf provides a superior level of real estate services to home buyers and sellers in Coeur d'Alene and Kootenai County, Idaho. Visit www.JannaScharf.com to search for homes in the Coeur d'Alene MLS for anywhere in spectacular North Idaho.
No matter how grand or modest your real estate dreams may be, you can turn to me in confidence. Give me a call today and let me know what I can do to be of service to you!
Janna Rankin Scharf AB, GRI, CSP, CNS, CLHMS 208.651.9700
Janna,
Great post! I used to work in Loss Mitigation for a large national bank. I blogged about this, too. It just breaks my heart how people are being ripped off.
Maryellen
Hi Janna! I have not heard of this here but, it surely is good to know! I hate to see others ripped off--especially when they're ALREADY struggling. Thanks for the advice.
Great post Janna! The more educated about the types of loans available to them, the greater position our country will wind up in.
Btw, thanks for commenting on my blog. :)
Hi Janna,
Thanks for taking the time to write this most informative post. Hopefully many will read it and become more aware. It pains me when I hear how some companies have taken advantage of those in financial trouble.
Janna, you are giving good guidance. The only thing I would add is that if you are a homeowner that is in trouble - call your lender immediately and ask for the Loss Mitigation Dept. Don't worry about whether you meet the "guidelines" or not. I network with a lot of other mortgage professionals and I'm hearing that the cooperation you receive from one lender to the next varies greatly. If I had to make an educated guess, the willingness of the lender to work with the consumer is a combination of the financial strength of the lender and how much (if any) of the Federal bail out funds they've received.
I'm also telling homeowners that if they don't like the first answer they get - keep calling. The rules are changing by the day!
One last point - to date I have not heard of any loan modifications taking place without some harm comging to the homeowner's credit rating first. If you hear otherwise, I'd be suspicious and wary.
Michael - Thanks, those are some good points. You're right, the rules change every day, it's a challenge to keep up.