Loan Modification Question, How Can You Get Help If You Value Your Credit?

It seems to me that from the bank's perspective, a loan modification where the value of the home is adjusted to current market value is pretty much the same as a short sale. When life events such as divorce, unemployment, medical problems cause financial hardship, it is great that banks will work with owners to help them out with a loan mod or short sale. I can remember hearing about a time when they foreclosed, period.

If the owner doesn't currently have a financial hardship, why should banks take a loss on his loan? It sounds like the homeowner this blog is written about is very conscientious and has taken pains to be financially responsible.  He is obviously someone who thinks and plans ahead and is therefore worried that he'll go an entire year before finding work. He's saved his money in case he has a life emergency, this is it, and he's prepared.

We are told that banks are overwhelmed with short sale and loan mod requests from people who are already facing financial hardship. This is why short sale approvals take so long. Would banks become paralyzed if they started doing loan mods for people who are not currently in financial hardship?

I have been wondering what happens to those who do eventually loose their home for whatever reason. I would hope that the vast majority become renters or have relatives to live with but what of the others? Homeless families and families going on federal and state assistance pose a further strain on an already stressed system and are more of a stress on society in general. Will we become a nation of thousands of foreclosed properties while our citizens become homeless or dependent on public assistance? I think loan modification and any other available program to help people stay in their homes must be explored. I do understand Colleen's point above but there are the very real faces of this crisis that cannot be forgot. Political, economic and any other ideologies do not help families in crisis or teetering on the verge of crisis. The question of whether it is your obligation to help is easily answered as no. It is not your obligation to help on any citizen or taxpayer type level; there is no big brother government who will force you to do what you can. But as a person who is a part of a larger society, as a member of the human race, yes that alone should compel you to want to help. As this issue is debated and the political will to address it is muddled, people like the one in your example and others, real people, face this grim reality daily. There is a saying that is more appropriate than anything I can write, "There but for the Grace of God, go I." It is important that these issues are addressed but action must follow. I hope the person you refer to and the thousands of other who are facing the reality of these issues is able to get the help that is needed.

Hi, Fred, Thanks for bringing this to light! I've been working with an attorney here in Rhode Island who has had success in negotiating modifications for borrowers who aren't yet delinquent, but will be. They key is to show why the current situation is worse than that originally underwritten, as hardship can exist without delinquency. Dan

Fred - the only way to go with this scenario is through an attorney (check out www.debtadvisoryalliance.com for a modification attorney in the specific area), but the no 'money up front' and 'guarantee of accomplishment' are unrealistic requirements.  There isn't an attorney worth having that will not require a retainer, nor will they guarantee results. 

Yes. My company has had a 93% Success rate. We are attorney based and we have had a lot of success with clients who are not delinquent yet. You can email me at Jhall@myloanhost.com

www.Ejhomesolutions.com

Fred - Although provisions are being made to accomodate troubled but current mortgagors, your client's options are limited until they are late on their payment. In the banks eyes, as long as an asset is performing there is no motivation to modify its terms.

That said, your client does have a hardship (unemployment) and banks are aware that some of their loan products/pools are better modified now than later. The likelihood of securing a modification without a job is not good. Your client needs to be making money for debt service. If your client's home has any equity the likelihood of modification decreases too.

As for the absurdity of destroying your client's credit rating, I think this notion is overblown. A mortgage late is not uncommon in the current financial environment. The Sun will again rise. Twelve months from now, after your client has found a job, modified the terms of his mortgage and is actually saving money, the late will be removed from his credit report.

Citi is relatively easy to deal with on loan mods. The lady who runs their Office of Homeowner preservation is Hala Farid. Before joining Citi, Ms. Farid worked for NHS of NYC for 7.5 years, developing curriculums, conducting seminars and counseling first time homebuyers and borrowers in danger of losing their homes.

Hala has a heart of Gold and plenty of empathy.

That being said, the issue here is that this is a Fannie Mae loan and as such can't be modified without being in arrears.

EXCEPT.... There is a Fannie Mae program that does fit the bill. It is called a "Special Forebearance". This plan allows the homeowner who is current to make 4 payments at 25% of their current payment (without being reported late on their credit report). At the end of the "Special Forebearance" period the mortgage is then modified into a payment in keeping with the borrowers demonstrated ability to pay.

The "Special Forebearance" in effect has the homeowner 2 months in arrears at the end of the 4 month plan. This allows the loan to then be modified under Fannie Mae guidlines.

 I have personally helped many homeowners do this themselves, it is possible if you know what is available, know the programs, know who to talk to at your lender, and have the tenacity to not take no for an answer.

Now that you know the name of the program you fit into you can call back and suggest it to them, my thought is whoever you spoke with originally wasn't educated by their employer properly in all of the help available today for at risk borrowers.

You can contact Hala directly:

Hala Farid  hala.farid@citi.com

OR, contact The Office of Homeownership Preservation: mortgagehelp@citi.com  Or call 1-866-915-9417

Dan Harris -

Author of "How To Modify Your Mortgage"  http://www.loanmodbook.com

My E-mail for questions  mailto:dan@homeretentiongroup.com

Loan Modification does work, your outcome depends on who you have do your loan modification.  Well Fred, I've come across many situations similiar to hers in my capacity and I've broken it down this way. If you don't have a definitive plan of how your going to get out of your present loan and your pulling money from your savings or 401k plan or wherever just to make up the mortgage payments than your only forestalling the inevitable.  You will end up back where you started but with your savings and retirements depleted. You will not have the resources that would give you more choice and so you will end up falling behind in your payments which will ruin your credit and if it continues on this path you will end up losing your home.  The whole economy has problems, people are losing hours and overtime if they're lucky. Unemployment rate is on the rise everywhere, to me it's easier to rebuild my credit than to rebuild my life from homelessness.

Fred

I'm with you on your idea that loan mods will help more than anything else.  As for the delinquent issue, I have found a company who has what sounds like the idea.  When you go 30 days or more delinquent that is when it hits your credit.  So, they tell their clients if they are not already behind to pay on obout the 25th of the month before it goes to their credit report.  I guess it stands to establish that the owner is having a difficult time paying but w/o the negative hit to credit. There is more to it than that, but that is one of the issues involved in qualifying the owner. They have several staff lawyers who work the negotiations etc & have fantastic success with getting people some very nice payment reductions.  I think they seem very legit.  If you would like to know who they are, please e-mail me. I would also like your input as to if you have heard of them.  Currently they are completing over 1000 per month.  Sounds like they are doing something right.  Oh they do have a 100% money back guarantee if they don't get you a nice amount off your payment, & they specify a number % amount.  Only ones I've found that do that on the guarantee.

Craig Chapman   CraigsHouseDeals@yahoo.com

Fred, Borrowers do not have to be delinquent to be considered for loan modification but every lender takes a position on this. They must demonstrate a hardship or an eminent default situation. They also need a watertight financial package and hardship letter (in their own words) explaining how the hardship has impacted their situation and how they intend to cure it. For most folks, negotiating on their own is high anxiety for them as well as the mitigator. Suggest this person call a local bankruptcy attorney for a referral to someone modifying loans successfully in their area.

Imminent Default Explained by Freddie Mac: http://www.freddiemac.com/avoidforeclosure/scenario1_borrower.html

Unfortunately there are many loans that have been securitized in MBS pools and the servicers and investors are hiding behind their specific imminent default provisions. Many investors/servicers claim that their PSA's (pooling and servicing agreements) only allow for modification in the case of serious delinquencies.

This means that if your mortgage is in one of these pools the investor wants to suck every last drop of money you have available from your accounts (if you let them), before you can get assistance.

If you are in this situation you will be forced to think and consider long and hard the ramifications of draining your retirement and paying the 40% tax and penalties on that withdrawal as compared with halting payments and having your credit suffer.

My opinion is that if you have suffered a short term hardship that caused you to fall short then taking some money out of retirement funds might be ok.

If on the other hand you have suffered a long term hardship that is ongoing like a loss of income, and draining your retirement funds is only going to prolong the inevitable default on your mortgage then it would probably be more prudent to make your payments as long as possible with your normal disposable income and stop paying when you can no longer keep up.

One other thing, many homeowners fall into the trap of using credit cards to pay bills and buy food so they can keep current on thier mortgage. If your loan is included in the above scenario YOU ARE BEING PENALIZED for this behavior. Don't borrow money at revolving credit card interest rates to keep your head above water. The credit card debt will become the lead anchor around your neck and it won't be long before you drown in debt.

PLEASE make absolutely sure the professional you hire knows this area very well...

You don't want them "cutting their teeth" on your file

Author of "How To Modify Your Mortgage"  http://www.LoanModBook.com

Free Loan Modification Advice Forum:  http://www.LoanModMan.com

I agree with Dan.  There are some that really do need the loan modificaiton and would benefit from it.  Of course, there are those that will go default again, but in the big picture... who are we to say who needs it and who doesn't.

I work in a housing counseling position too and I know from that .. that there are homeowners out there that really need the modification and really deserve.  But the lenders are not giving them to many.

And that is just because of their own greed - has nothing much to do with the homeowners.