"Unqualified" homeowners are being offered mortgage loan modifications by their bank or mortgage lender that are ultimately designed to fail, in a slight of hand effort to offer token assistance to consumers who should never have received mortgage loans in the first place.
Although many ‘qualified' consumers are receiving favorably modified mortgage loan terms due in large part to sufficient monthly income and low debt to income ratios, many homeowners who have lost significant household income since first receiving their mortgage loan are being locked out of the loan modification process. Even the government sponsored mortgage loan bailout programs are disqualifying many of these homeowners simply because they would not otherwise qualify under regular government loan-underwriting guidelines.
Thousands of homeowners, whose mortgage loans have been identified as loans that should have never closed in the first place, are being targeted early on in the loan modification process, often suggesting that the homeowners should strongly consider selling their home or refinancing with another mortgage lender, rather than making a bad loan, better.
It is easy to tell a good loan modification from a token loan modification, simply by using the following formulas:
A good mortgage loan modification is one where your mortgage lender offers:
*Reduce the principal balance of the outstanding mortgage loan balance in line with the property's
current value
*Convert an Adjustable Rate Mortgage (ARM) into a fixed rate interest loan
*Waive interest and escrow arrearages, including unpaid property taxes and hazard insurance
*A low good faith payment to reinstate a past due loan
A token mortgage loan modification where the mortgage lender offers:
*Add past due interest and/or escrow arrearages to the mortgage loan's current principal balance
*Setting a high interest ARM into a high interest fixed rate mortgage loan
*Increasing a mortgage loan's term from 30 years to as much as 40 years
*A high good faith payment to reinstate a past due loan, often times higher than what a homeowner can reasonably afford to pay at one time.
A good loan modification has improved loan delinquencies tremendously, where in opposition; the token mortgage loan modification has provided disastrous results, often leaving many of these same homeowners in the same quandary they were in even before the loan was modified!
Homes secured by ‘underwater' mortgage loans, that is, where the mortgage loan balance exceeds that of the home's current market value, are without a doubt a huge problem for consumers and industry alike. Consumers who have suffered financial setbacks such as a job loss or a loss of income, and continue to pay a mortgage loan that is taking a larger portion of their household income that an ordinary would never approve of, should strongly consider their options, including the sale of their home. Although the option of refinancing a mortgage loan is an option, applicants must still qualify for financing and may have difficulty if their current lender will not consider them to a good risk.
Although homes secured by underwater mortgage loans will likely not sell in a buyer's market such as the down market we are currently experiencing nationwide, a home could sell as a short sale, with many banks and lenders who originally offered a token mortgage loan modification, more than willing to accept a short sale followed by the subsequent debt forgiveness for the remaining principal mortgage loan balance.
The quicker a homeowner accepts the fact that an unaffordable mortgage loan is best resolved by a short sale, the quicker they can re-establish their good standing and purchase another home another home, secured by a mortgage loan that is affordable and perhaps no longer underwater.
For FREE information regarding the benefits of short selling your home, please call (941) 206-6000.
Mike Sikorski, MBA, GRI
Licensed Real Estate Broker
Licensed Mortgage Broker
MLS OF FLORIDA REALTY CORP.
22079 Kimble Avenue
Port Charlotte, Florida 33952
Phone (941) 206-6000
Email: Mike@FloridaRealty.net
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