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Loan Modification Questions & Answers

Below are the most frequent questions about loan modifications and their answers. No legal advice is provided. Each case is unique in its way. Please seek professional legal counsel.

Is a Loan Modification For Me?

Usually a loan modification is a good solution for a property owner if the property owner has a steady source of income, can keep paying if the mortgage is reduced and wants to stay at the property.

Do I qualify for a loan modification?

To qualify for loan modification, the property owner must have enough steady income to keep up with the mortgage if the payments are reduced.

Do I necessarily need to be in default to modify my loan?

No. Loan modifications can be negotiated for properties in default and current in payments.

What is a Loan Modification?

A loan modification is a re-structuring of a property owner's mortgage payments such that they are more affordable.

What is forbearance?

Forbearance is a voluntary postponement of the foreclosure process by the creditor. Often the creditor refrains from foreclosing in exchange for the homeowner paying part of the arrears in default. The other part of the arrears are "thrown into the back end" of the loan. Typically there is no change in the monthly payment amount. Creditors typically attempt forbearance before accepting a loan modification. Property owners often confuse forbearance as being the same as loan modification.

How are Loan Modifications Negotiated?

In the states of Oregon and Washington, most successful loan modifications are negotiated through attorneys assisted by expert witnesses and facilitators. In this arrangement, an attorney firm represents a property owner to make the case that the loan should be re-structured such that the property owner can keep up with the mortgage payment. The expert witnesses provide the needed evidence. The facilitator assists the property owner in gathering the needed documents.

Can a property owner negotiate his or her own loan modifications?

Yes! Homeowners can definitely negotiate their own loan modification. However, most property owners don't have the expertise, time and instruments to effectively negotiate an advantageous loan modification.

What are the advantages of an attorney-based loan modification?

Uses the judicial system in your favor
Takes advantage of consumer protection laws
Experience
Efficient
Faster
Systematic approach
Has team in place
Objective view of the situation
Creditors respond better when they hear the word "attorney"

What makes a loan modification proposal acceptable to the lenders?

For a loan modification to be acceptable by the creditors, the property owner needs to show two main facts:

Evident hardship and inability to keep making mortgage payments at the current rate.
Demonstrated ability to continue paying if mortgage payments are reduced.

What is better: A refi or a loan modification?

Loan modifications and refinances are entirely different animals. One is not better than the other.

In a refinance, a new mortgage is created and the existing mortgage is paid off.
In a loan modification, an existing loan is re-structured such that payments are more affordable.

What is important is to select the right option based on the existing situation. Both refinances and modifications have advantages and disadvantages.

How much does it cost to modify a loan?

In most situations, loan modifications are less costly than current monthly mortgage payments. We offer a loan modification service fee with payment divided into 4 or 5 installments in order to make it more affordable. For pricing information call me, Oscar Morante, at 971-222-3435 or email me at oscar@bestshortsales.com.

What is the loan modification process? How long does it take?

www.bestshortsales.com www.oscarpdx.com www.rapidforeclosuredata.com wwww.shortsaleprocessing.com

Posted by Oscar Morante on 12/10/2008 04:12 PM

Comments (25)

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25 Comments on Loan Modification Questions & Answers

JAN

HI,

I HAVE BEEN IN MY HOUSE FOR OVER 10 MONTHS WITHOUT PAYING MY MORTGAGE DUE TO REDUCTION IN MY INCOME. I FILED FOR BANKRUPTCY AT THE END OF NOVEMBER 2008 AND EVERYTHING WAS DISCHARGED INCLUDING MY HOUSE. MY QUESTIONS IS : DO I HAVE ANY OPTION OF KEEPING THIS HOUSE BASED ON THE FACT THAT I DO NOT HAVE ANY DEBT AND MY INCOME IS BETTER NOW ?

Orlando:

Thanks for considering me for your loan modification questions. Loan modification results depend on specific situations. If you have income, I would consult with your bankruptcy attorney and a loan modification expert. There may be issues in your discharge that may affect the loan modification. If there is full refund guarantee, it is definetly worth trying.

If you are in Oregon or Washington I can help you. If you are in other state I may be able to give you a referral if I have a connection. Hopefully this helps.

Sincerely,

Oscar

www.bestshortsales.com www.rapidforeclosuredata.com www.oscarpdx.com www.nwloanmodnet.com

APR

Can I get a modification then later get a refinance?

MAY

Are loan modifications common for investment properties? We are renting a house (since January) and were just notified that it is in forclosure (no mortgage payments since last October). The owner is saying they are in the modification process but since it's one of many an investment properties not the owner's primary residence I'm very skeptical. We're afraid the owner is just pocketing our monthly payments as the house moves closer to public sale. The mortgage company won't talk to us - and the owner alreay lied when signing the initial rental agreement saying the mortgage was in good standing.

Thanks!

JUN

Do you know anyone in the Northern Virginia area to do loan modification?

Thanks.

June:

Although I am in Oregon, I can do loan modification in Northern Virginia. Call me at 971-222-3734. Sincerely,

Oscar Morante

JUN

During the Loan modification process, do I make my mortgage payments?

JUN

Brian:

Your question is if you should keep paying during the loan modification process. The answer is "it depend". Some banks will presently not do a loan modification as long as you are current. One of the is presently Wachovia. Look at your situation, examine and decide. Once you start missing payments, you will quickly get to the point of no safe return.

Oscar Morante

www.ModificationsLoan.net

971-222-3734

JUN

I was told that I have to be late on my payments in order to modifity my loan and my invester also must be enrolled in the modification program. So how do I get or whom do I call to get a modification started on a current home loan?

JUN

Is it likely the bank would give me a loan modification if I have substantial assets such as checking and brokerage accounts? I was laid off, so my income was greatly reduced; however, I still receive some rental income. Overall, my income is not enough to cover the mortgage and other expenses, and I'll have to start dipping into savings. Furthermore, my loan is greater than the value of the house, so it doesn't make sense to sell it.

Harold

JUL

I own an investment property out of state with 2 other partners in an LLC. Our interest rate is 7.25% on a $332,000 loan on a property that is worth $179,000 which we paid $415,000. One of the partners is pulling out and just not able to afford it anymore. My other partner and I would be so strapped at the current mortgage that we will probably have to walk away unless there was a loan modification. What are our chances as an LLC, having paid on time, current on our payments, but see foreclosure in our future. Our renters do not even cover half of our expenses.

Scott

Scott:

Thanks for considering me for your loan modification needs. I am sorry to see that you are having such a loss. Depending on what state you are at, I may be able to help you.

At this point, it is a tought decision to hold on to the property or not. Loans on investment properties are tougher to modify. Depending on the situation they may be worth trying. Look at my web site www.NWLossMitigation.com. There are loan mod samples and plenty of content that may be of your interest.

Click HERE to download samples.
Click HERE to download our qualification form.

Sincerely,

Oscar Morante

info@nwlossmit.com

971-222-3734

www.nwlossmit.com

JUL

do you have any connections or influence in the chicago area? i have a 6% interest loan on my primary residence and would like to go through the loan modification process to see if i can possibly lower my payments. i have not missed a payment and i do have good credit. i can afford my mortgage, but i do have to work two jobs to make it happen, and the mortgage is about 36% of my monthly income. any ideas??

I can help you. Go to my web site www.nwlossmit.com and download the pre-qualification form. Completed and email it back to me together with your last two months pay stubs and latest mortgage statement)s).

Oscar Morante

971-222-3734

info@nwlossmit.com

AUG

I have enough in the bank to make one more payment on my home. I lost my job and am looking for a new one. I have my house up for short sale right now. The house is in GA and I am in KS.My house in GA is my home. The mortgage company will not divulge any info to me on hamp, harp or much on the short sale. I was told to get a offer and send in all paperwork, and they will consider taking the offer. If I get a job in KS will I be able to apply for a modification instead of short sale. Will this be worth it? What will short sale do to my credit? I am married but separated and we never filed taxes or have credit cards together, nor is his name on my mortgage will that be considered in either short sale or modification?

Ally:
Thanks for connecting with me for your loan mod needs. Mods on non-primary residences are tough. If you make the property your primary residence, most likely you get a good result. Go to www.NWLossMit.com. You will find sample results and prequalification form. I can help you with your mod if you need it.
Sincerely,
Oscar

AUG

Hello all, I am glad I came across this article, first of all it's very informative and second I also noticed that some of the people who have commented still have some additional questions.

If I may, I have been in the Mortgage Industry the better part of eight years; I have worked for large banks and small broker offices. I am currently working for a reputable Real Estate Attorney, I was hired because of my experience and knowledge in this field.

There are three key areas I would like you all to consider before hiring a loan modification company. Ask the company you're considering the following:

1. Do you have an in-house Real Estate Attorney?
Most loan modification co. outsource the attorney or negotiatos. The problem with that is that you don't have up to the minute updates on what is happening with your file. Also, because these lawyers take on business from different loan modifications companies they get overwhelmed with business and pay little of no attention to the client's specific needs.

2. Do you have examples of current or past client's loan modifications?
All modification companies will tell you how great they are... ask them to show you. If they are as good as they claim to be they should not have a problem showing you examples of past successful loan modifications.

3. Do they offer a contract and a guarantee in writing?
Be careful. My number one complaint is.. "my bank isn't willing to help".
Guess what my number two complaint is?
"I paid a loan modification place and after 5-7 months, they didn't do anything for me"
My next question to the client is... Did you have a guarantee?
Some say "no", others say "yes",, was it in writing? "no".
This is a waste of time and a waste of money.

Recap:
Ask for a Real Estate Attorney
(keep in mind that loan officers specialize in finding you a loan - Realtors specialize in buying and selling homes)

Ask for examples of loan modifications recently completed.
Ask for a money back guarantee in case the loan modification doesn't go through.
Don't be afraid to ask questions. Good Luck,

I can answer any additional questions you may have regarding a loan modification.
949-419-8922

AUG

I wanted to comment on the fact that there is misleading information in this blog and with the number of people being taken advantage of under the guise of "loan modification" I wanted to help clear it up.

Here is what I am referring to:

"Do I qualify for a loan modification?

To qualify for loan modification, the property owner must have enough steady income to keep up with the mortgage if the payments are reduced."

Sounds so simple doesn't it? If that is all that is necessary for a property owner to qualify then why are so many people getting turned away???

The truth of the matter is that a large majority of people don't qualify and anyone who tells you that you qualify simply because you have an income is lying to you and wants to take your money. The lenders have set guidelines that they are following now to qualify people for a loan modification. A large reason for this was the onset of "Making Homes Affordable" put forth a few months ago by the Obama administration. This program was designed to help home owners keep their homes. Now don't be fooled, the banks aren't losing out under this program. For every loan modification they approve under the "Making Homes Affordable" guidelines the banks get a kick back from the government so if the banks are going to give you a modification they are going to do their best to get it done under MHA.

So why are people still getting denied???

First off, don't expect the lenders to make sense. They see the general public simply as numbers evaluated by how much risk that number poses. Also keep in mind that the major lenders (Bank of America, Wells Fargo, Chase) are getting 5 to 7 thousand loan modification requests a day. They simply just don't have enough time to get to all of the requests. This leads the lenders to deny you as quickly as they can since they have hundreds of cases waiting behind yours.

Now I’m sure you’re curious what the guidelines are to qualify under the making homes affordable. The short answer is that your mortgage payment should not be more than 31% of your household GROSS monthly income. That 31% payment will be your PITI (Principle, Interest, Taxes, and Insurance). For example, let’s say you have a current mortgage payment of $2500 per month (again, that includes interest, taxes and insurance) and your household gross monthly income is $6000. Under the making homes affordable guidelines your monthly mortgage payment should be around $1800 a month, again that's PITI. As you can see, if you fit this general box you can save some serious cash.

I want to take a minute and throw out a scenario that I have come across a lot. Let's use similar numbers and say that you have a mortgage payment of $2500, but your household gross monthly income is $8500. Under the MHA guidelines, that would give you a monthly mortgage payment of $2635; $135 MORE than what your current mortgage payment is. You would not qualify if this was your case. I have talked to a number of people who are looking to modify their loan because they paid $300,000 for their home and now it is only worth $200,000 (Called being upside down). They fall into a category, like the one I just outlined, where they make too much money and the bank will deny them even though they are upside down on their house. The same is true for high interest rates. If you make too much money compared to your current monthly payment, you will get denied.

It's not fair, but those are the rules the banks are playing by.

Now, I do want to say that if you do fit the MHA box, that isn't enough to qualify you. The banks also take into consideration your Expenses vs. Income. Basically, you have to make enough each month to cover your expenses including your new mortgage payment, but not make so much that it looks like you should be able to afford your old mortgage. This can get a little complicated, but basically you want your expenses to balance with your income.

You may be asking "given all this information, why can't I do a loan modification myself?" and the honest answer is: You can. It just takes anywhere for 50 - 60 hours worth of work dealing with your lender, tons of energy filling out paperwork and even after all of this your lender may still come back and say you're denied. It can be very frustrating. BTW, if your lender says you don't qualify, that is not necessarily the case. Again, they are looking for any little reason to tell you “no” so if you have been turned down, don't think this means you don't have any options. I agree with the author of this blog that professional legal help is absolutely necessary if your lender is not willing to work with you and to be careful if you choose to go with a company that is supposedly attorney backed. Many of them say they are, but all they do is call a friend that is a contract attorney, not a real estate attorney.

I hope this information is helpful. I know it’s a lot, but I have just seen too many people get taken advantage of. If you have any questions, please email me and I will be happy to help if I can.

Email: bradd@americanlr.com

AUG

If i were to gualify for a loan modificaiton and were approved. Will the difference in the payments be tacked on to the back of my loan.

Will my credit report show late or diliquent?

does the modifaction last for the duration of the loan or just a couple of months

Tammy:

Thanks for participating in this blog. Here are your answers to the questions.

Most likely your delinquent payments will be added to the back end of the loan.

Most likely your credit report will show you as 30, 60, 90 or 120 day late derrogatories. Whatever corresponds to your situation. Eventually that will expire and be removed.

Go to http://www.nwlossmit.com/loan-modifications for downloading a pre-qualification form.

Hopefully this helps.

Sincerely,

Oscar Morante

Info@nwlossmit.com

971-222-3734

Tammy,

Great questions and unfortunately there isn't an easy answer to any of them.

Regarding the difference being tacked on to the back of your loan, that shouldn't happen if the modification is done right. That being said I have come across situations where a home owner will try and do the modification themselves and the bank will do something like this. That's not the point of a modification, but these lenders will do anything to get their money.

For your credit, right now lenders are not even looking at a loan modification application unless the individual is late on their mortgage payment. That does affect your credit. Unfortunately, that is the game the banks are playing right now.

Finally, the duration of your loan modification depends on the what is negotiated with your lender. Under the "Making Homes Affordable" plan loans are modified for five years and then adjust. If the loan is not modified under this plan, then it is up to your lender what the new terms of the loan will be. That is why it is so important to work with an experienced professional to help get your loan modification done.

Brad DeVore

bradd@americanlr.com

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OCT

I am trying to help my elderly parents, who are in danger of losing their home in Arizona. They are currently just over 90 days late with their mortgage. They have received notice that if the mortgage is not brought up to date by Oct 23d, foreclosure proceedings will begin. The house is worth approx $725K. They owe $492,000 on the original mortgage. They unfortunately also owe $197K on a second mortgage. Ugh!

We (I) have just finished getting the house ready to list for sale. Unfortunately, in AZ (as in many places right now) houses of this size are not moving quickly. The average sale takes 250 days!

My father is 81 years old, my mother, 74. They are both healthy (thank goodness). He has always worked for himself (his company) and still does. And until the last decade, he has done quite well. Life circumstances and a few poor choices in the past few years has put them in this situation.

My question is this: Due to both the economy, and his age, his business (mining and chemical equipment brokerage) has SIGNIFICANTLY dropped off. Therefore his ability to show "steady" income is limited. He still closes a deal here and there, but he just doesn't have the ability to chase and scramble for business like he used to (getting old ain't easy). Might he qualify for a loan modification? What might other options be?

Appreciate any information you might be able to provide. As a non-homeowner who's only now being brought fully up to speed on the situation, I'm on QUITE a learning curve here.

Best regards,

Courtney

Courtney,

Without diving into the many details involved in your parents situation, I wanted to encourage you to contact me directly. I am located in Phoenix, AZ and I know this market very well. I would be happy to discuss the options there are to help your parents and meet with you regarding this. Please email me at bradd@americanlr.com if you are interested in finding out more.

Thank you,

Brad DeVore

www.americanloanrestructuring.com

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