LOAN MODIFICATION UPDATE

As you have probably seen on the news, lenders loan modification guidelines are changing daily.

I wanted to take a moment and give you a detailed update on the most recent information regarding: 

 

Loan Modification, Forensic Loan-Reviews, Loan Balance Reduction, as well as a detailed breakdown of the things we can do to improve our chances and the speed of a beneficial loan modification negotiation with the lender.

 

Please take your time reviewing this information and please call or email me if you have any questions at all. 

 

LOAN MODIFICATION UPDATE

 

In this email I have included information on the following:

 

1) New Finding May Ease Concerns That Borrowers Would Fall Behind on Loans after a Modification

 

2) HALF of all loan workouts still result in the same or HIGHER payments!

 

3) Myth: Lenders and servicers are doing everything they can to assist struggling homeowners.

 

4) Homeowners may need legal help and a “true” advocate that will look at these loans and tell the truth.

 

5) Latest Options Available to Homeowners

 

a) Loan Modification

b) Forensic Loan Review

c) Short-Pay Refinance

d) Who Qualifies

 

 

1) New Finding May Ease Concerns That Borrowers Would Fall Behind on Loans

A new study shows that by CUTTING financially troubled borrowers’ monthly mortgage payments by MORE THAN 10% reduces the chances that they will fall behind on their mortgage payments after their loan is MODIFIED..

 

 

The report, released Friday by the Office of the Comptroller of the Currency and the Office of Thrift Supervision, comes as mortgage companies are preparing to modify loans under the Obama administration’s foreclosure-prevention plan, which provides financial incentives to encourage mortgage companies and investors to reduce borrowers’ mortgage-related payments to 31% of income.

 

 

“The administration plan is premised on the notion that if you lower the payment enough you can produce sustainable modifications,” said Comptroller of the Currency John C. Dugan. The report, he added, “provides evidence in support of that thought.”

 

It could help allay concerns that scores of borrowers whose loans are reworked will fall behind again on their mortgages, leading to higher losses for lenders and investors who hold these loans.

 

However it needs to be noted that while modifications that result in LOWER payments are increasing nearly half of all loan modifications result in the same or higher payments!

 

2) HALF of all loan workouts still result in the same or HIGHER payments!

 

Nearly HALF of all loan workouts still result in the same or HIGHER payments, for homeowners that contact their lender directly, the study found.

The re-default rate was less than 26% after nine months when monthly mortgage payments were cut by more than 10% after the modification. 

 

In comparison, more than 50% of homeowners re-default when the mortgage payment increased or remained the same after the modification!

 

Loan modifications that leave the payment unchanged or higher “in better times were more sustainable,” Mr. Dugan said. “In this climate, leaving mortgage payments unchanged or increasing them is resulting in too high of a risk of re-default.”

 

Modifications can result in higher monthly payments because, by the time loans are worked out, borrowers often are behind on their payments. Lenders frequently have been adding these past-due amounts, which can include principal, interest, taxes and insurance, driving monthly payments higher.

 

The government is pressuring lenders to step up their efforts to modify loans and reduce borrowers’ payments in response to pressure to reduce foreclosures.

 

Still, roughly one in four borrowers saw their payments increase after their loan was modified.

 

 

3) Myth: Lenders and servicers are doing everything they can to assist struggling homeowners.

 

 

According to President Obama, “Right now, when families seek to modify a loan, they often find themselves navigating a maze of rules and regulations but rarely finding answers. Some lenders are willing to renegotiate; many aren’t. Your ability to restructure your loan depends on where you live, the company that owns or manages your loan, or even the agent who happens to answer the phone on the day you call.

 

Lenders do not have enough man power to help all the wounded homeowners suffering in their mortgage contracts. Tens of thousands of employees have been laid off and the lenders simply do not have the man power to assist all the homeowners that are contacting the lenders on their own competing for the lenders assistance.

 

 

The reality is that many of these homeowners that are facing foreclosure or that are no longer able to refinance may be victims of predatory lending and or mortgage fraud due to the banks loose lending guidelines over the past 5 years. Many homeowners that received a loan easily during the last 5 years are finding it nearly impossible to refinance today.

 

 

4) Homeowners may need legal help and a “true” advocate that will look at these loans and tell the truth.

 

Homeowner’s may want to have their loans examined by “independent” third parties. This independent organization should act as a non-biased “buffer” between the lender and the homeowner. This organization’s purpose should be to identify unlawful and predatory mortgages. They then should properly advise the borrower on what they can do to remedy their situation.

 

By working with an experienced team of attorneys, negotiators and loss mitigation experts homeowners can exponentially increase their chances for a successful loan modification and more importantly a payment and or principle balance reduction.

 

By going to the lender without assistance or representation it is like going to the IRS and allowing them to do your taxes for you!!!

If you and your family have considered a loan modification read the options available below:

 

 

5) Latest Options Available to Homeowners

 

a)    Loan Modification

b)    Forensic Loan Review

c)    FHA Short-Pay Refinance

d)    Who Qualifies

 

a) Loan Modification

 

Who qualifies:
Any homeowner can qualify for loss mitigation and loan modification as long as they present a lender or servicing company with a strong enough case that after a forensic cost benefit analysis it is determined that it makes more financial sense to modify the mortgage than to let it run its current course.

Misconception:

Loss mitigation and mortgage relief is reserved for people that cannot afford their home or their mortgage payment. This is untrue. Anyone can qualify for loss mitigation and mortgage relief. The factors that create a solid case for loan modification vary from lender to lender and are changing daily. So whether you have a fixed rate or an adjustable, whether you have a large amount of equity or you are upside down, whether you just received a raise or you lost your job, whether you have never missed a payment or you are considering foreclosure, whether you have large reserves or you are living off of credit, whether you are trying to modify your primary residence or your investment property, whether you own 1 home or 18, if it is determined that your specific situation and lender guidelines qualify you for loan modification then modifying your loan is not only possible it is guaranteed.

 

 

 

b) What is a Forensic Loan Review?

 

A Forensic Loan Review is an important tool when forcing lenders to negotiate with us for a loan modification, an FHA Short-Pay Refinance or a Short Sale (especially if we have not been late on our mortgage).

 

Many lenders are trying to avoid negotiating with homeowners that are either current on their mortgages or that are only slightly delinquent. Lenders are first working with people that are just about to foreclose (and will cause the greatest and most immediate cost to the lender).

 

It is becoming apparent that a Forensic Loan Review is a necessary tool in getting the lender to negotiate with us for a Loan Modification, an FHA Short Refinance or a Short Sale (all of which require calculated negotiations with the lender) whether a client is late on their mortgage or not.

 

Even a minor $30 miscalculation on the lender’s part could be an actionable offense, and the threat of a lawsuit is often enough to persuade the lender to deal with you in trying to find a way to help you work through your financial difficulties.

 

In a forensic loan review, a legal pathologist scours your loan documents looking for errors in, among other things, the truth in-lending (TIL) statement the lender provided shortly after you applied for your mortgage and the lender’s annual-percentage-rate (APR) calculation so you could compare loan costs.

If the TIL statement doesn’t match up with the HUD-1 closing-cost sheet you received at closing, if the APR is off by just a hair, you might have cause for legal action against the lender.

 

Typically, forensic loan audits are ordered by mortgage investors to determine what kind of legal liability confronts them in the pools of loans they already own or are considering buying. As a so-called “business-to-business service,” they are not generally available to individual borrowers.

 

That is until recently.

 

American Mortgage Relief Services is now offering comprehensive loan document reviews to homeowners as part of its service to help homeowners get the attention of their lenders and ultimately achieve powerful loan modification results.

 

If an error is found, it can force the lender to move you up to the front of the long, long line of borrowers who are looking for loan modification.

In some cases, if people were simply overcharged by $30 on the final HUD-1, or if the APR was higher by just .125 percent than was originally disclosed, this may give the lawyers leverage when negotiating with the lender to grant a beneficial loan modification.

 

This is an excellent option for homeowners that have Negative Amortization or Pick a Pay loans.

The TIL (truth in lending) statement for Neg Am loans are notorious for having mistakes.

Because Neg Am loans have 2 interest rates (the minimum payment rate and the fully amortized rate) the APR is very difficult to calculate and there is bound to be mistakes on the paperwork.
Intentional or not these mistakes give negotiators the leverage to force lenders to modify the loan.

 

 

 

c) What is a Short-Pay Refinance? (Principle Reduction)

 

Another powerful option for homeowners that have not been late on their mortgage but are interested in a loan modification or principle reduction is the new Short-Pay Refinance.

 

Many homeowners still have good income, and have not been late on their mortgage or credit cards but cannot refinance because the value of their home has dropped in recent months.

For these individuals there is a powerful option that went into effect in October called the Short-Pay Refinance.

 

Where as a “Short Sale” has become a well known solution for borrowers to avoid foreclosure by selling their home for less than what is owed, the “Short Payoff Refinance” (Short-Pay Refi) is becoming a popular tool for borrowers to retain their home.

 

This process is similar to a short sale but, instead of the property being sold, it is refinanced with a new FHA backed lender.  A Short-Pay Refi is unique in that it allows the borrowers to keep their home, lower their payments and eliminate the upside down equity in their homes while reducing their principal.

 

The transaction itself is a basically a three part process.

 

1.     First we need to establish the actual current conservative value of the home with an appraiser.

 

2.     Next, we document and underwrite the homeowner’s income for the new appraised value and issue an approval.

 

3.     Now, armed with that approval, we can enter into equity re-negotiations with the bank/loan servicer of the homeowner’s loan to negotiate a principle reduction on the current mortgage.

 

Once the bank/loan servicer accepts the offer presented, we can complete the new loan transaction and principle reduction.

 

In areas where values have dropped 20% or more, this could mean a substantial reduction in principle and loss to the lender.

It is still a win win for the homeowner and the lender (who gets to remove the bad loan from their books and move forward making new loans.

 

Who should get a Short-Pay Refi?

 

For those borrowers that still have decent credit, ficos, income and no mortgage lates but through either upcoming changes to their interest rate (making it no longer affordable) or to a decline in the value of their home (owing more than it’s worth), a Short-Pay Refi is the perfect solution.

Through the Short Refi, the borrower will qualify to refinance into a low fixed rate loan at the highest LTV’s (loan to value ratio) possible.

This allows the borrowers to put the brakes on before everything gets away from them and spins out of control.

 

Why would the bank/loan servicer agree to a Short-Pay Refi and not just foreclose on the property?

 

Simply put, foreclosing on a property requires large amounts of legal fees and then the home is typically sold at a substantial discount off of the fair market value.  The Short-Pay Refi allows the loan servicer to avoid the majority of the legal fees and let’s the new lender make its largest loan based on the fair market value.  When a Loan Modification can’t solve the problem as many loan servicers are not lenders, a Short-Pay Refi becomes a very powerful alternative.

 

To sum it up.

 

In essence, with a Short Payoff Refinance, the bank/loan servicers are happy because the loan is off their books and the homeowners are happy because they get a fresh start while still staying in their home with a lower mortgage payment and a lower mortgage balance.

 

Loan modifications, short refinances and short sales all require that we negotiate with the lender.

 

The lender will not grant a Short Refinance a Short Sale or a Loan Modification unless you negotiate and present your case without a shadow of a doubt. As with any negotiations the final outcome and results are determined by knowledge and experience of the negotiator. One important factor stands alone in determining the best results and that is Professional Negotiation Assistance.

 

Even for people that believe they may qualify for the Presidents new Homeowner Affordability Plan, having professional assistance may be more important than ever.

With the Presidents new Homeowner Affordability Plan homeowners may only get one shot at getting a loan modification. Once you submit your financials you may not get another chance, making it more important than ever to have a professional on your side (just as you would with a divorce, bankruptcy, arrest or injury).

 

 

There is a complex set of procedures, negotiations, and documentation that needs to be completed. In most states this process needs to be performed by an attorney or properly licensed counselor.

The key to borrower success is navigating the red tape and unfamiliar internal processes at banks and lenders and knowing when to be aggressive and when to take the offer and this is why working with professional loan modification experts is extremely important.

Even more frustrating and challenging is the fact that the lender that services our loans may not be the ultimate investor that owns the note. The loan modification guidelines for the company that services your loan may be dramatically different from the company that owns the note. In addition to this the loan modification guidelines are changing monthly and vary from bank to bank. Countrywide has changed their guidelines on late mortgage payments 3 times in as many months. Countrywide even told one of my clients that what may work with Countrywide last month won’t always work this month. This is exactly why homeowners need professional assistance to obtain the best results possible.

The window for homeowners to qualify is very small and it is getting smaller due to stricter guidelines and audits as a result of the President’s Plan. Many lenders require homeowners to have monthly positive income to qualify while others require negative cash flow and it is different depending on the lender.

 

So if a homeowner doesn’t know this information (because lenders do not put out guidelines for public use) it can be difficult for homeowners to know how to approach the lender with the proper numbers.

 

Homeowners could disqualify themselves immediately by saying the wrong thing and they may only get one shot.

 

The next step for anyone considering loan modification is first finding out if they qualify and second seeking advice and assistance in obtaining the best results for a successful loan modification.

 

 

d) Who Qualifies?

 

The next step for any homeowner interested to see if they qualify for one of these programs is to simply fill out the Free Loan Evaluation Form (attached in this email) and send it back to me for our network of attorneys to review.

 

This Free Loan Evaluation Form will allow us to determine if your financial profile fits within the eligibility requirements for a successful loan modification or Short Refinance and if you qualify under the Presidents new Homeowner Affordability Plan.

 

You will receive an approval within 24 – 48 hours after completing this Free Loan Evaluation Form.

 

  

If you have any questions at all about your current mortgage, loan modification, short refinances, short sales, credit scores or new home purchases, please give me a call or email me anytime.

 

 

I hope that this information was helpful and I am looking forward to speaking with you soon and helping you in any way I can.