Making Home Affordable and Stimulus Refi Programs are now the hot buzz words in mortgage land. But exactly what are they and who qualifies for help?
Folks in financial distress need to know they have options. But how do you find out what those options are? Most banks and mortgage lenders are just finding how what to do about the high percentage of folks coming in for whom we have no classic answers. And we just hate saying "No" or worse yet: "I don't know!" Fortunately, the Obama administration has seen fit to refine the original Bush 'Hope For Homeowners' program. Since the original Hope roll out was something of a disaster, the current plan looks pretty sweet by comparison although real results are yet to be seen.
Where Do You Start?The phone number on your Mortgage Statement will direct you the accounts payable department. If your loan is in some state of default your case may have been escalated to the not quite so nice folks in 'loss mitigation', glorified collection agents hired by your bank to make you pay...or else. These contractors have a similar goal: keep you in the highest possible loan instrument so the bank makes the most money ad infinitum.
Loan Modification...what is it? The basic premise is one of renegotiating the terms of your existing loan contract with your mortgage holder if your financial circumstances have changed or you simply cannot afford the new adjustable rate reset for whatever reason. The key word is 'negotiation'.
Who Are Loan Modifiers? Offers to"Reduce your interest rate to just 2% in just 10 Days" are obviously preying on the hopes of the desperate. Some scam artists have just taken money and done zilch--these crooks are being run out of our state on a rail, thank goodness!
What are the BEST Options? Depends entirely on your circumstances. Just don't wait until you are in serious trouble. You DON'T have to be behind on your payments to get the ball rolling. Your accountant or bookkeeper can help you look at the basic facts to explore what measures may be open to you. After all, if you have insufficient income to meet your current obligations you might need a Plan B.
Common Questions about Loan Modification:
1. Will My Loan Size Be Reduced? Unlikely since the Banks are running this show. A recently proposed bill to allow bankruptcy judges to adjust loan amounts was soundly defeated...no surprise there.
2. How Much Will My Interest Rate Be Reduced? There is no set rate as it depends, entirely on you, your budget, your grip on reality (how many holidays a year you need for example?) and your negotiator's skill. We have seen 4% or better and some variance on how long it's fixed with long term rates well under commercial fixed rates for the full term of your loan. However, this is NOT an easy refinance. You must file hardship letter and be prepared to prove you cannot qualify for a traditional loan first.
3. Will My Loan Terms Be Lengthened? Maybe. Again there is no 'set system'. The goal of modification is to come up with a solution that nets a payment you can afford over time to allow you to keep your home. We have seen 30 years to 50 years. No kidding. Naturally, the Bank wants you paying your mortgage as a god ling time so they eventually get their money.
The NEW Home Preservation Foundation is essentially a consumer clearing house: They refer you to a HUD a counselor Check out: http://www.995hope.org/ (originally labeled 'Hope For Homeowners').
NOTE: To date the BILLIONS of dollars spent setting up Hope for Homeowners has only resulted in 51 loans being negotiated, and only one of those was deemed legal. At least there is some transparency about the failure!
Here's how HUD counseling works: You call the hot-line and a counselor is assigned to you. The counselor explores what you can afford and will send their recommendation to the lender for either a repayment plan, modification or refinance. You submit wads of paperwork. Then they step aside and you either get an offer or you are left to fend for yourself with your lender. It can take literally 3+ months for a result. You are kept in the dark most of that time.
What About the Stimulus Making Home Affordable Refinance Programs?To qualify for these, you must have a Fannie or Freddie Loan (not designed for Sub-prime or FHA or VA or Private Loans) So in essence this program is only about bailing out the conventional Fannie/Freddie banks.
Check the site: http://www.makinghomeaffordable.gov/loan_lookup.html
Private Loan Modification: Washington state has officially formalized the Loan Modification process in concert with our Department of Financial Institutions, the governing body of mortgage banks and brokers. We now have a clear set of what can be done by whom (licensed brokers, loan officers or attorneys) and for how much. $1,500 is a typical broker's fee in Washington for what can be a three month negotiation process (depends on many factors). Private modifiers are accountable to you, not your bank! Private modifiers are not limited to 5 year terms like the MHA plans.
Some legal firms offer loan modification as part of their bankruptcy practice. Expect legal fees in line with their other professional services.
ARE Modifications Successful? Our anecdotal evidence suggests that private loan modifications are working because your personal negotiator is not motivated by commission or the bank's interest. Since the Banks getting PAID to modify your loan with the Stimulus funds they are motivated and hiring staff to help clear the backlog of applications. That's right...The bank receives up to $5,000 for successfully modifying your loan for the five year Stimulus plan.
Some Much Needed Levity Enjoy this You Tube on "Hope the Early Years" and a sneak a peek at Timothy Geithner's home on the block (still). He's probably considering these very options himself! https://www.thinkbigworksmall.com/mypage/tbws/9614/1018553