News
Last week I detailed the implications of the nationwide mortgage modification situation. This week I relate the implications to the individual property owner.
As is typical with any new federal programs, there is lots of confusion. Regrettably, the scammers surface to feed on the uninformed. For the informed, distressed homeowner, this is a once-in-a-lifetime opportunity.
What is a loan modification?
A loan modification is an existing mortgage “modified” to match current economic reality. The concept is not new. The federal stimulus package is. The lender is persuaded to “re-write” the note. New terms of the mortgage are written. One or more terms of the note can be changed and the changes are permanent.
It absolutely is not a refinance; there is no credit score, closing costs, or property appraisal. Professional, attorney-driven loan modifications typically accomplish:
• Lower interest rates
• Lower payments
• Convert an ARM or I/O to a 30-year fixed rate mortgage
• Principal reduction
• Foreclosures stopped (up to 12 days before sale)
Mortgage modification and foreclosure avoidance are two separate processes. The homeowner is ultimately responsible for stopping a foreclosure unless they are negotiating through an attorney. It has happened that a foreclosure has occurred in the midst on a modification negotiation.
Mortgage loan modifications can be attempted at any point in the life of the mortgage. For many lenders, it is not necessary to be behind in monthly mortgage payments. There are some lenders that are requiring proof of “imminent default,” however. This is one more twisted development in the industry. If anyone else suggested that the homeowner skip payments, they'd be in jail within a week. But your lender can suggest, or even demand it with a straight face and no legal repercussions. Yikes!
The distressed mortgage owner has an initial, emotional decision to make: Do I want to keep my home? Or do I just want to escape my mortgage/property obligation and move on? Once this decision is made, the course is clear: Keep my home — attempt a mortgage modification. Move on — attempt a short sale. Doing nothing and letting the system take control is not/should not be an option. Regardless of your decision, the U.S. will recover from this situation. The distressed homeowner that takes control will survive to own another home a few years from now. The ones who walk away will be the last, if ever, to own another piece of real estate, ever.
I urge everyone to pull out a calculator and play along at home:
The federal government estimated 4 million homes were in need of a mortgage modification. It was reported that 235,000 modifications were “approved” from March through July. This computes to 4 months at 9 percent success. The U.S. Treasury goal was to put pressure on lenders to get 250,000 by November. That computes to 3 months at 13 percent. Now, if the Treasury is successful in twisting the arms of lenders to jump a huge 4 percent in modification negotiations, and the attorney groups are 90-95 percent successful, what does that indicate as to the success potential of anyone who does not use a national attorney?
A personal banker is not going to modify any loan. An underwriter with a dim light under the stairs is going to CONSIDER any modification. Their job is to negotiate in the best interest of the lender they work for, not the individual homeowner or the federal government. To date, no one has found a homeowner who has actually spoken to any of these “Approved Advocates.” They don't have time to converse with any single distressed homeowner. They will, however, take a call from a U. S. attorney. They have their calculators and THINK they have the rule book. Given the statistics above, imagine that applications are a mountain of manila files on their desk. They are buried.
Next week, in part three of three, I'll further explain the personal import to the individual homeowner. I have three critical points to explain, and the financial investment to the distressed homeowner. I'll explain the credit score implications, as well as the potential for mortgage modifications of investment property.
Chris Dix writes and publishes his blog on Mortgage Modifications at www.Mortgage-Mod-Monster.com. He also publishes www.Mortgage-Monster.com/grand-junction, a website that covers economic and employment as well as mortgage opportunities on Colorado's Western Slope. Locally, he can be reached at 242-2600.
As is typical with any new federal programs, there is lots of confusion. Regrettably, the scammers surface to feed on the uninformed. For the informed, distressed homeowner, this is a once-in-a-lifetime opportunity.
What is a loan modification?
A loan modification is an existing mortgage “modified” to match current economic reality. The concept is not new. The federal stimulus package is. The lender is persuaded to “re-write” the note. New terms of the mortgage are written. One or more terms of the note can be changed and the changes are permanent.
It absolutely is not a refinance; there is no credit score, closing costs, or property appraisal. Professional, attorney-driven loan modifications typically accomplish:
• Lower interest rates
• Lower payments
• Convert an ARM or I/O to a 30-year fixed rate mortgage
• Principal reduction
• Foreclosures stopped (up to 12 days before sale)
Mortgage modification and foreclosure avoidance are two separate processes. The homeowner is ultimately responsible for stopping a foreclosure unless they are negotiating through an attorney. It has happened that a foreclosure has occurred in the midst on a modification negotiation.
Mortgage loan modifications can be attempted at any point in the life of the mortgage. For many lenders, it is not necessary to be behind in monthly mortgage payments. There are some lenders that are requiring proof of “imminent default,” however. This is one more twisted development in the industry. If anyone else suggested that the homeowner skip payments, they'd be in jail within a week. But your lender can suggest, or even demand it with a straight face and no legal repercussions. Yikes!
The distressed mortgage owner has an initial, emotional decision to make: Do I want to keep my home? Or do I just want to escape my mortgage/property obligation and move on? Once this decision is made, the course is clear: Keep my home — attempt a mortgage modification. Move on — attempt a short sale. Doing nothing and letting the system take control is not/should not be an option. Regardless of your decision, the U.S. will recover from this situation. The distressed homeowner that takes control will survive to own another home a few years from now. The ones who walk away will be the last, if ever, to own another piece of real estate, ever.
I urge everyone to pull out a calculator and play along at home:
The federal government estimated 4 million homes were in need of a mortgage modification. It was reported that 235,000 modifications were “approved” from March through July. This computes to 4 months at 9 percent success. The U.S. Treasury goal was to put pressure on lenders to get 250,000 by November. That computes to 3 months at 13 percent. Now, if the Treasury is successful in twisting the arms of lenders to jump a huge 4 percent in modification negotiations, and the attorney groups are 90-95 percent successful, what does that indicate as to the success potential of anyone who does not use a national attorney?
A personal banker is not going to modify any loan. An underwriter with a dim light under the stairs is going to CONSIDER any modification. Their job is to negotiate in the best interest of the lender they work for, not the individual homeowner or the federal government. To date, no one has found a homeowner who has actually spoken to any of these “Approved Advocates.” They don't have time to converse with any single distressed homeowner. They will, however, take a call from a U. S. attorney. They have their calculators and THINK they have the rule book. Given the statistics above, imagine that applications are a mountain of manila files on their desk. They are buried.
Next week, in part three of three, I'll further explain the personal import to the individual homeowner. I have three critical points to explain, and the financial investment to the distressed homeowner. I'll explain the credit score implications, as well as the potential for mortgage modifications of investment property.
Chris Dix writes and publishes his blog on Mortgage Modifications at www.Mortgage-Mod-Monster.com. He also publishes www.Mortgage-Monster.com/grand-junction, a website that covers economic and employment as well as mortgage opportunities on Colorado's Western Slope. Locally, he can be reached at 242-2600.
