Just announced that FHA will permit the $8,000 tax credit, via a "bridge loan", to be used towards the down payment.
This is done by an approved nonprofit or governmental agency who typically will give the loan on the condition of being provided certain documents at closing (Final HUD namely), and will require that the credit be filed for that day. The loan is recorded in 2nd position on title, typically interest free, and is released when it is repaid. Missouri started this before FHA made this announcement, and they require theirs to be repaid by June 2010. Washington, Colorado, Idaho, Ohio, New Jersey, Delaware, Tennessee, Pennsylvania and New Mexico soon followed in participation. I'm sure many more state, local and likely federal agencies will get involved.
I've found there is a lot of confusion when using online mortgage calculators to try and estimate payments when buying a home. Most calculators just give principal & interest, and there is good reason, but it's nice to have the big picture when trying to estimate payments - as these days it is more common to have an escrow account where property taxes/homeowners insurance is paid along with the principal & interest portion of the mortgage payment. Plus even if you don't pay those items along with your mortgage payment you'll see want to be aware of their costs.
The makeup of a mortgage payment can consist of: principal & interest on the loan, property taxes, homeowners insurance, mortgage insurance, and flood insurance. Other items to be aware of are any homeowners association (HOA) fees that your specific neighborhood, community or city might have. The reason for the underlined letters is that is what generally makes up the mortgage payment - PITI, the other items aren't always charged (on condos homeowners insurance isn't required either).
Principal & interest is easy to calculate as like I said, all online mortgage calculators can calculate that as you just input a loan amount, interest rate, and loan term (15 years, 30 years, etc.).
Property taxes are a little trickier. Most think that you just take the current property taxes but that can be misleading. What the current property taxes are is what the current owner is paying, not necessarily what you will be paying, they could be but not always. To get a real good idea of what your property taxes will be after you purchase the home call the county's assessor and ask if anything triggers a re-assessment of a properties value, if re-assessments are done on a set schedule, etc. and all other types of questions you'd like to know about how they determine a properties assessed value. Values can be assessed in various ways but the most common that I've seen is when it's based on the new sales price (where a % of the sales price, or a formula based on the sales price, determines what the new amount of property taxes are), is on a set schedule to assess (such as every 12 months, 2 years, etc.), or when an additional impovement has been placed on the property (such as when a home is put up, or a casita addition out back in the yard, etc.). If taxes are re-assessed on a set schedule in a lot of cases it is not based on the new sales price, just based on the general direction of home values. Whatever the case is, you now know when, what triggers a re-assessment, and what the assessed value would like be. But that doesn't answer what the property taxes are, just the assessed value. So next you need to contact the county treasurer's office or in some cases it's actually just called the tax collector, these are the people that collect the property taxes from you. In less populated areas this could also be the same as the assessor's office. You'd supply the tax collector people with the assessed value you determined by using the information the assessor gave you, an address you have in mind or perhaps just a street name, zip code or school district, and ask what the formula would be to determine how much the property taxes are. It can be simple or have multiple steps and involve some algebra, either way it's important to know so you can properly budget for your new home. I'd also ask if the formula is different for other areas, as it often is. Here in California property taxes are re-assessed when a home is sold or transferred, they take the new sales price or value minus a $7,000 homeowners exemption (if owner occupied), multiplied typically by 1%, and that equals the base amount of property taxes, and then any special assessments/mello-roos is added on top of that (usually flat $ amounts).
Homeowners insurance isn't as involved to determine. The best way to determine what you could be paying for homeowners insurance is simply by calling up a homeowners insurance agent and inquire about quotes. Depending on the square footage of the home, sales price/value, proximity to a fire hydrant, type of roof, if it has an alarm system or not, amongst other items determines the annual premium - but you can always be as general or specific as you'd like when you ask for the quote. When you talk to the insurance agent you can also find out if any other special type of insurance is generally required or taken in your area, such as flood insurance if you are in a low lying area (some of the central plains states, Florida and parts of Louisiana), or hurricane insurance (Gulf Coast areas), or earthquake insurance (if you live along/near a fault line). I've seen insurance policies as cheap as a few hundred bucks all the way up to several thousands (and that was just a normal sized home in Florida).
Mortgage insurance is another item that may be included in your mortgage payment. Mortgage insurance is becoming more common as the use of FHA, and the reduction of the % of your home's value a 2nd mortgage can go up to (called the "loan to value" or LTV), have developed. When you have 20% down (or can get the 1st mortgages LTV to 80% or below) with conventional financing mortgage insurance is not required - however when the 1st mortgages LTV exceeds 80% then an extra insurance policy is needed to protect the lender in the event you default on your mortgage, that is private mortgage insurance (PMI). FHA requires mortgage insurance (MI) too, but is waived after you've paid it for at least 5 years and until your LTV gets to 78% of the original value, or you take a 15-year mortgage term or less and have 10% equity/down payment. Since conventional financing relies on the use of 3rd party insurers, it's called PMI, FHA is self insured by HUD, and therefore is just MI. When talking about it in general though either is common to use. The amount of MI is based upon your loan amount, it's either .55% or .5% per year, divided over your 12 monthly payments each year. PMI is also based on your loan amount, as well as FICO score, loan program type, property type, occupancy type, LTV, purpose, etc. PMI can also come in various forms rather than the straight additional amount added to the other portions of the mortgage paymet, you can take a slightly higher rate in trade for not paying the monthly amount, pay an upfront lump sum to buy it out, and other options depending on what the mortgage lender has set up with it's PMI vendors VA & USDA loans do not have monthly MI.
Lastly, in some areas (newer areas) you might have homeowners association (HOA) fees. The development you are buying in could have HOA fees to keep up it's common areas, the landscaping in your own yard, the electric gate that leads to your neighborhood. Then that development could be part of a community/city which could have more common elements such as a clubhouse, a pool/splash park, trails, skate park, etc. HOA fees on a condo will be more than they would be on a house, if any at all. This is because on a condo the HOA fee usually includes a homeowners insurance policy that covers the dwelling (not personal or liability coverage though). So if the condo burns down it could be rebuilt, but all of your items inside would not be replaced or value reimbursed to you, and the neighbor who trips over your garden hose and busts his teeth while escaping the fire would not be covered either. Because of that you should also look into getting an additional condo policy for those extra coverage areas, usually runs just a few hundred a year.
Ginnie Mae has put out a mortgage calculator that compares FHA, VA & Conventional payments given a sales price, interest rate and any funds for down payment you may have. You can edit/add/remove property taxes, insurance, HOA fees and even a space for utilities & maintenace costs. Once you gather the above information, and know what interest rates you could expect to qualify for, you can accurately estimate your payments on your own. You should find that the P&I portion of the payment is not the same amongst FHA, VA & Conventional given the same loan amount/interest rate... this is because on FHA & VA loans there is an additional upfront cost not found on conventional loans (FHA has an upfront mortgage insurance premium, UFMIP, and VA has a funding fee usually).
Example of my county treasurer's website where you can get current tax rates, tax amounts, and estimate taxes (saves a call to the treasurer): http://tax.ocgov.com/tcweb/search_page.asp
I just got an email from the South Carolina USDA office stating the below - at least the delay isn't due to lack of funds, etc. and is just because HUD is taking a little longer to come out with their 2009 income limits:
A notice will be published in the Federal Register this week changing the effective date for the consolidated income bands from March 20 to April 20, 2009.
The reason for the change is that the USDA Rural Development receives the basis for its income limits from the Department of Housing and Urban Development (HUD) and HUD has not published their 2009 income limits as early as they usually do.
Once Rural Development receives HUD's income limits, Rural Development must make a number of adjustments. After the adjustments are made, the Information Technology staff must make changes to our automation tools, for example, our eligibility website (link below) and our Guaranteed Underwriting System (GUS). Making those changes includes testing them to make sure they work properly.
You might have been reading a lot of lenders limiting cash out on FHA loans to 85% LTV, or maybe have heard rumors about FHA limiting cash out to 85% LTV... well the end of March will be the last day you can order FHA case #'s and still be able to do cash out over 85% LTV. See snippet from mortgagee letter below:
"Effective for case number assignments on or after April 1, 2009, the loan-to-value (LTV) of any cash-out refinance to be insured by FHA may not exceed 85 percent of the appraiser's estimate of value.
Given the continued deterioration in the housing market, and FHA's need to limit its exposure to undue risk, this reduction to the maximum LTV for cash-out refinances is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken. "
This Mortgagee Letter provides information on Federal Housing Administration (FHA) single family loan limits that have changed as a result of the American Recovery and Reinvestment Act of 2009 (ARRA) signed into law on February 17, 2009. These limits are effective for those loans for which credit is approved in calendar year (CY) 2009 and will remain in effect until December 31, 2009.
FHA Single Family Programs Affected:
The loan limits described in this Mortgagee Letter are effective for those mortgages insured under the following Sections of the National Housing Act: 203(b)(FHA's basic 1-4 family mortgage insurance program - including individual condominium units), 203(h)(mortgages for disaster victims), and 203(k)(rehabilitation mortgage insurance).
FHA loan limits for Section 255, Home Equity Conversion Mortgages (HECM) are effective immediately for those loans closed on or after the date of this mortgagee letter. Further instructions for HECM loan limits are set forth below.
Revisions to Current Limits:
Under ARRA, the revised FHA loan limits for 2009 will be set at the higher of the loan limits established for 2008 under the Economic Stimulus Act of 2008 (ESA) or those established for 2009 under the Housing and Economic Recovery Act of 2008 (HERA).
2009 HERA vs. 2008 ESA Limits:
Under ESA, loan limits for high-cost areas were set at 125 percent of local house price medians, with a maximum high-cost limit (the national ceiling) of 175 percent of the national conforming limit ($729,750 in the continental U.S.). See Mortgagee Letter 2008-06, dated March 6, 2008.
HERA, on the other hand, stipulated that the national conforming loan limit remain at $417,000 for 2009, and that in future years, it shall be pegged to a house-price index chosen by the Federal Housing Finance Agency. HERA also provided that the one-unit mortgage limit for any given area shall be set at 115 percent of the median house price in that area, except that the FHA mortgage limit in any given area could not exceed 150 percent of the Freddie Mac national conforming loan limit ($417,000 in 2009), nor be lower than 65 percent of that limit. See Mortgagee Letter 2008-36, dated November 7, 2008. FHA's floor and ceiling loan limits for 2009 under ARRA, which relies on the higher of HERA or ESA, are set forth below.
FHA Floor:
Under both HERA and ESA, and thus under ARRA as well, the FHA national floor limits remain set at the 65 percent amount (the "floor,") by property size, as follows: One-Unit $271,050 Two-Unit $347,000 Three-Unit $419,400 Four-Unit $521,250
"High-Cost" Local Limits:
Any area where the limits exceed the floor is known as a "high cost" area. Because ESA used a higher multiple in establishing the national FHA loan limit ceiling, as a percentage of the conforming loan limit, than does HERA (175 percent versus 150 percent), the ESA national ceiling is binding under ARRA for 2009. By property size, these national "ceiling" limits are as follows: One-Unit $729,750 Two-Unit $934,200 Three-Unit $1,129,250 Four-Unit $1,403,400
For areas where the higher of the ESA-determined loan limits for 2008 and the HERA-determined limits for 2009 is in between the national floor and the ceiling, the limit shall be at the higher of those two limits, effective for any loans for which credit is approved in CY 2009.
The list of areas where the FHA mortgage limits are at the ceiling is provided in Attachment I. The list of areas where the FHA mortgage limits are in between the ceiling and the floor is provided in Attachment II. For any areas not listed in either Attachment I or II, the FHA mortgage limits are at the floor; this includes the vast majority of those areas (i.e., counties, parishes, boroughs, and independent cities) for which FHA has published loan limits.
Special Exceptions for Alaska, Hawaii, Guam, and Virgin Islands:
Loan limits for the special exception areas of Alaska (AK), Hawaii (HI), Guam (GU) and Virgin Islands (VI) also follow the ARRA rule of choosing the higher of the 2008 ESA and 2009 HERA limits. The National Housing Act permits mortgage limits for Alaska, Guam, Hawaii and the Virgin Islands to be adjusted up to 150 percent of the above national ceilings, by property size, to account for higher costs of construction. Thus, these four areas have a potential higher ceiling in 2009 of $1,094,625 (1-unit), $1,401,300 (2-unit) $1,693,875 (3-unit); and $2,105,100 (4-unit). At the present time, no counties in these areas qualify for limits above the national ceiling of $729,750.
Home Equity Conversion Mortgages (aka a reverse mortgage):
Under ARRA, the national FHA loan limit for HECM will increase from $417,000 to $625,500 (from 100 percent to 150 percent of the conforming limit). HECM loan mortgagors do not undergo the same procedures for credit approval as do mortgagors for forward mortgages. FHA does not deem the credit approval process to be complete until the HECM loan is closed. Therefore, HECM loans closed on or after the date of this Mortgagee Letter are subject to the higher maximum dollar amounts.
In those areas, the maximum claim payable by FHA is 150 percent of the Freddie Mac conforming limits. To avoid potential cases where a claim could be less than the national limit, as adjusted for the special exception areas, HUD had decided not to make the adjustment. Therefore, these few special exception areas will have the same $625,500 limit as all other areas.
FHA will, for a limited time, allow HECM loans that received case number assignments but did not close prior to the effective date of this mortgagee letter to be closed using either the old limit that was used to originally calculate the loan, or the new limits as prescribed herein. An option will be made available in FHA Connection for the lender to choose which rate to use. This option will be available until April 30, 2009.
Where to find comprehensive listing of FHA local limits:
Complete schedules of FHA mortgage limits for all areas, for forward loans and reverse mortgages, are available through the internet at https://entp.hud.gov/idapp/html/hicostlook.cfm. The limits are determined by the county in which the property is located, except that for properties located in metropolitan or micropolitan statistical areas, as determined by the Office of Management and Budget, the limit for the entire area is set based on the county with the highest median price within the metropolitan or micropolitan area. If you are unsure if a county is within one of the metropolitan or micropolitan areas listed on the attachments you should check the internet site before closing the mortgage at the revised limit. For a complete list of all metropolitan counties in the country by MSA, view the most recent bulletin updating statistical areas of definitions and guidance at http://www.whitehouse.gov/omb/bulletins/index.html.
We are sending this to our California animal lovers and asking you all to read the following and then make a quick call to Sacramento.
It's no secret that California is in dire need of money, but the governor is proposing that pets be considered 'luxuries' and therefore a 9% to 10% tax should be levied on services rendered by vets. While most of us can afford such a tax, others will be pushed beyond their ability to pay, resulting in the abandonment of many pets.
Please protest this tax by calling Sacramento. The number is to an automated survey at the governor's office. The call is not free, but it It will take less than a minute and ill cost very little.
Dial: 916-445-2841
The numbers to press in response to the questions are: 1 - 5 - 1 - 2 (i.e., 1 = for English; 5 = to transfer to veterinary tax proposal; 1 = to choose to comment on the veterinary tax proposal; and 2 = to oppose the tax.
Take a moment and take action NOW.
Please tell your friends and ask them to do the same.
The County's Mortgage Assistance Program provides silent second loans to aid low income first-time homebuyers, with annual incomes not exceeding 80% of the Area Median Income (AMI). The loans are designed to help pay for down payment and closing costs to purchase a home. The 3% simple interest, deferred payment loan has a term of 30 or 45 years depending on the funding source and a maximum loan amount of $40,000. Homebuyers must occupy the property as their primary residence. There is a 1% minimum down payment required, and the total sales prices shall not exceed 85% of the Orange County median sales price for all homes. All applicants are required to attend a homebuyer education workshop.
For additional information on the Mortgage Assistance Program or to get pre-qualified, please contact the Affordable Housing Clearinghouse at (949) 859-9255.
Orange County Workforce Loans
The Orange County Housing Trust also provides low-interest second mortgages to qualified first-time homebuyers and down payment assistance grants to members of the Orange County workforce who wish to move closer to their place of employment. Second mortgages up to $110,000 are available to first-time homebuyers with incomes up to 160% of the area median income.
For additional information on this program, please contact the Orange County Housing Trust at (714) 490-1250 or visit their website www.ochousingtrust.org.
Mortgage Credit Certificate Program
The Mortgage Credit Certificate (MCC) program is offered through the County of Orange, in partnership with Affordable Housing Applications. The MCC is a Federal Income Tax Credit program and entitles applicants to take a federal income tax credit of twenty percent (20%) of the annual interest they pay on their home mortgage. Because the MCC reduces an applicant's federal income taxes and increases their net earnings, it helps homebuyers qualify for a first home mortgage. The MCC is registered with the IRS, and it continues to decrease federal income taxes each year for as long as an applicant lives in the home.
For more information on the Mortgage Credit Certificate Program, call (800) 591-3111 or visit www.ahahousing.com.
Orange County Housing Fund
The NeighborWorks HomeOwnership Center of Neighborhood Housing Services of Orange County provides services and training for clients looking to purchase and maintain their home. Services range from providing comprehensive homeownership education to a wide-range of down payment assistance loans and grants. Neighborhood Housing Services also partners with lenders and realtors to offer a selection of affordable mortgage products and real estate services that assists homebuyers avoid excessive down payment and closing costs fees. For more information on the types of services Neighborhood Housing Services provides, call (714) 490-1250, or visit their website at www.nhsoc.org.
Down Payment Assistance Programs
Orange County Housing Trust
The Orange County Housing Trust can provide loans of up to $8,000 to first time buyers in Orange County, or current Orange County homeowners who will reduce their commute to their place of employment by 30 miles a day. To qualify for this assistance, the borrower must have an income below 40% of the area median income. The down payment assistance loan carries a 1% interest and is payable in full on the maturity date of the first mortgage or upon any sale, transfer, assignment, or refinancing of the first mortgage. For additional information on this program, please contact the Orange County Housing Trust at (714) 490-1250 or visit their website www.ochousingtrust.org.
WISH Program
The Neighborhood Housing Services of Orange County offers a down payment assistance grant program that provides up to $15,000 to each household, matching up to $3 for each $1 contributed by the first time homebuyer. Families must not exceed 80% of the Orange County median income, and must purchase a home within the County. For more information on the qualifying criteria, call Neighborhood Housing Services at (714) 490-1250, or visit their website at www.nhsoc.org.
That question seems to be popping up quite often lately. In recent weeks memo's from USDA offices have informed us that they estimate funds will run out very soon. There are even banks who have decided to cut off funding for USDA too, sometimes in the midst of the transaction. For the most part banks are still funding USDA loans, and they say everything is status quo, but the question is for how much longer.
It is pretty normal for USDA to run out of funding, happens quite often. USDA gets their funds in blocks that are approved by congress, and the current block of money was supposed to run until the end of March, however since USDA is one of the remaining sources of 100% financing this last block was used up at a quicker pace than was expected.
USDA has never run out of funds this quickly before and some officials have said they are unsure when more funding will be approved by Congress. In the past when funds have run out lenders have been able to use surplus funds to fulfill those loans it committed to doing and kept it in their servicing portfolio until the USDA was granted more money by Congress and then those loans became saleable, and when sold then lenders freed up that money to fund new loans. However since banks are not as liquid as they used to be they have less money to fund new loans, they will appropriate less of dollar amount of money towards funding new USDA loans due to not being able to sell them without USDA's guarantee.
The way that a lender secures/reserves funds with USDA to guarantee their loan is by sending off a Request for Reservation of Funds form after they have received a loan file in underwriting. Typically this is not done until most of the documents are in the file although one can be sent in earlier in the process if really needed. When the USDA office grants the request, not when the request is sent, is when the funds in the block of money they are using are set aside for the loan. What you are used to hearing that the lender is waiting to get something back from USDA is the conditional commitments, which is saying if USDA has money then they will guarantee the loan. If the request for funds was not approved the lender may still fund the loan if they are OK with the conditional commitment and not the guarantee funds are there.
So what will eventually happen, short of a rush funding package by Congress, is that more and more lenders will stop funding USDA loans. It probably won't be all of them, and it might not be most of them but you will hear some of lenders temporarily suspending their USDA programs. The next block of money was scheduled to guarantee loans in April, May & June, however if another source of funds isn't come up with until then, those funds in the next block will be used to fulfill any commitments that have been issued prior to then. In short, we could see some rocky times with USDA loans in the next few months, so keep your ears & eyes open, and don't be afraid to contact your local USDA office, so you know what to expect.
Because I often see these infomercials running on weekend mornings and obscure night hours, and I often get asked what is buying a home at one of these auctions like, I thought I'd write a little about what I know about them.
My father in law went through the home auction process in the spring of 2008 out in Las Vegas when he tried to buy a home through USHomeAuction.com, the process was comical. His bid was accepted, however when the bid was presented to the bank (Countrywide) they balked and then countered to a higher sales price, which he accepted, paid for an appraisal, etc. and then finally when the bank who was doing the new loan (also Countrywide) got around to doing a verification which should have been addressed during the pre-approval stage, it failed, then they were denied their loan, and fortunately were able to back out and eventually got their earnest money back. I didn't know much about the auction at that time other than reading what was on the website, so I didn't know what really goes on.
I suspect what these home auctions are is a way for banks to get top dollar for their homes, it is not specifically designed for the buyer to get a smoking deal. When your offer is accepted at the auction it does not mean that the seller has accepted your offer, it just means that no one else at the auction bid more than you did. Your offer is now presented to the seller (the bank who owns the home) and if they determine it meets their minimum required amount then you get to buy the home for that price - this isn't much different than making an offer on a bank owned home that is listed on the MLS which your real estate agent can take you to see, plus you give up a lot of rights in the mandatory purchase agreement the auction houses use. However if they think the accepted bid is too low, they will counter the buyer back for a more beneficial (to the seller) offer. Further in a lot of situations there is a "reserve" amount that has to be met, meaning if a certain sales price isn't met it'll be denied at the end of the auction or in some reported situations there are actually "straw bidders" or "shills" who appear to only bid after it appears no other bids are being placed, creating the illusion as if people are wanting to pay higher prices and "rallying up the crowd". One person even observed one of these people winning, and then that same property being re-auctioned later on because the buyer wasn't able to qualify.
You also will want to make sure of the qualifications one has to meet in order to bid - is the bid open to anyone who can plunk down the initial $5k or do they actually need to be pre-approved in order to bid? If they aren't required to be pre-approved then non-approved individuals are jacking up the price of the home you want to buy every time they bid.
If you buy a home at an auction, make sure it is an "absolute auction" or "no reserve auction", where no minimum bid is required to be met and the highest qualified bid wins. I am aware Freddie Mac does these from time to time and if you search your local area you can find them advertised as well.
In any auction you want to do your own research before bidding on the home, usually you will know what homes will be auctioned off ahead of time so you should check each home out carefully, perhaps hire a home inspector for a day even, and the homes you really really want you should pay $350 (or however much) for an appraisal to determine what the fair market value is... and then with the appraisal & insight from your home inspector, you'll know exactly what your max bid on the home should be.
Since I am relatively close to the epicenter of the foreclosure crisis you might imagine how many homeowners in distress over their current mortgage situation I talk to. Since I am not a loan modification expert, nor do I do loan modifications for profit, I usually refer them over to www.loansafe.org so they can read up on successful loan modification stories from people with their same lender, or who are in similar situations. A good majority of them are usually having trouble making their current mortgage payment due to an ARM reset, going from interest only to fully amortized, or just because of poor budgeting. Occasionally, but a much smaller percentage, I'll hear from people who aren't having difficulty with their payments, rate isn't about to adjust, have budgeted just fine, but are on ARMs which will eventually lead to a dramatic rate change and are trying to be proactive by trying to renegotiate terms with their mortgage lender.
Below is a story from a client of mine in that later situation. It is here in California, but I've edited some parts to protect my client. For some background, the client has great credit, good financial position, had several years left on the fixed period of the ARM, but is in a market where values are falling so if they continue to do so, by the time the ARM does reset, there could very well be value issues. I also won't tell you the exact terms that were granted, as I'm sure the lender doesn't want this information floating around either, but I can tell you the rate was modified to a 5-year fixed rate at an extremely low interest rate (well below current market rates) and then the remaining 25 years fixed at another rate (that is less than 1% higher than current market rates). The client was able to get most of their information and develop their game plan just by reading the posts at www.loansafe.org.
Here is my clients letter to me explaining the process, I hope that you can use this to formulate your plan to get yourself help on your own loan modification and save your home from potential disaster down the road:
First, calling the loss mitigation number was useless. They're swamped with inquiries from people who are already behind, and whenever I called I was routinely told that since I wasn't behind in my payments, there was nothing to be done for me.
Failing that, I got the email addresses of several upper level executives from LoanSafe. I was given a list of about 18 or 20 individuals; it is common practice among some ailing homeowners to take a shotgun approach and send emails to all of them. I thought this was inappropriate, because I thought that it would give the appearance of non-rational reasoning. After all, why would the president of global investments or some random spokeswoman care about my appeal? Instead, I chose about 4 or 5 key executives, including the president, as the recipients of my email.
I knew that these executives must be inundated with requests titled "Please help!", "Desperate! Need a modification!", etc. I also knew that since I wasn't claiming hardship, I needed to bring something different to the table. If you recall, the situation I was in was a interest-only ARM at 6.25% with a second lien hanging over my home. My goal was to fix the ARM, but could not refinance because of my total LTV ratio.
The subject of my email was "Modification request - with a twist". I figured that it might at least pique somebody's curiosity. In my letter, I acknowledged that I was neither in distress nor was I facing an impending rate reset. My motivation for seeking a modification was to ensure some long-term stability during these difficult times. I highlighted the fact that I had made good faith efforts to refinance, but for the reason above was always turned away.
Here's my twist: in my letter, I proposed a modification that would have led to a higher monthly payment. I suggested changing my ARM to a fully-amortized 30 year fixed-rate loan at something like 5.5%, which was close to the prevailing rates (for conforming, though, not jumbo). This would have actually led to a slightly higher payment. I laid out my income and other debts to demonstrate that I would be able to afford the higher payment.
I highlighted my creditworthiness, noting that at one time a specific lender pulled my score and came up a score over 800. I commented that a prime, fixed 30 year loan of a well-qualified borrower would be an attractive financial instrument on the derivatives market. I noted that such an agreement would be advantageous to both borrower and lender. I also suggested that failure to act now could lead to more difficulties in the future, especially if property values continue to drop and a principal write-down is necessary.
Knowing that these financial considerations might not be "interesting" enough to the reader, I added a couple paragraphs which had a little bit of information about my spouse and me, to demonstrate that we're "good people" who deserve consideration.
I didn't exaggerate. I didn't complain. I didn't blame anyone for the loan that I was in. There are a lot of people out there who are in the "it's-everyone's-fault-but-mine" camp, and I do not believe that approach garners as much sympathy or extra attention as before. I took a chance on my approach because I thought it had a better-than-average chance of being noticed. If not, then no harm done; I'd try again later.
Well, obviously I got someone's attention. I was called a week later by an analyst from my mortgage company, and also received a letter from a supervisor who had seen my email message after it was forwarded to her by the president. My modification was approved shortly thereafter. I sent in our first new payment last week, and the final papers were notarized and returned this week. After my mortgage company signs and notarizes their sheet, it will be recorded with the county.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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