Loan Modifications - your piece of the stimulus pie!
Most people will not benefit from this "stimulus package". The majority of American will go to work each day, come home each night and be no better off because of this stimulus package. Sure a small percentage of the population will obtain a new job that was created as a result of the stimulus package, or if you are lucky enough to work for a large company that is receiving bailout money from Uncle Sam than you still get to keep your bonus (I just couldn't resist that one). The bottom line is that the average Joe is unlikely to see any benefit (directly not indirectly - we all benefit indirectly) from the stimulus package.
I want to share with you how you may be able to get some direct benefit from the stimulus package. Within the stimulus package there was a fund set up to benefit homeowners. This fund is to be used to reduce borrowers monthly mortgage payments through something called a "Loan Modification". The rule of thumb USE TO BE that you had to be behind on your payments before you could obtain any help. NOW, through this fund, the lenders are being given financial incentives to help borrowers BEFORE they go late on their mortgage payments. This is huge because you no longer have to "ruin" your credit by going 60 or 90 days past due on your mortgage to receive assistance!
So how does one get some of this stimulus money to help out with your mortgage payment? First, we recommend a free consultation with a reputable company to see if you qualify. This program is income driven. If you make too much money you will not qualify for assistance, and conversely if you make too little money you will not qualify as well. These income paramaters are not a fixed number. The income numbers work as a percentage of your mortgage payment. Therefore, the income qualification will differ from person to person.
OK, sounds great - just how much money can I get? Well lets look at a real life example. Let's take Mr. and Mrs. Smith. They have a $200,000 mortgage at 6% 30 year fixed rate which they have had for 5 years. They apply for a loan modification and receive no initial benefit from their lender but do get approved for the benefit available from the government stimulus fund. According to the terms of this stimulus package (see below for details), Mr. and Mrs. Smith would get a rate reduction to 4.25% for the next 5 years which would save them approximately $215 every month for the next 60 months (that's $12,900). In addition, the stimulus package says that if Mr. and Mrs. Smith make their payments on time for the next 5 years then they will get an additional $1,000 each year which will be applied directly to their mortgage as a principle reduction (that's another $5,000). Now at the end of that 5 year period their mortgage will adjust to a new rate. Their new rate is determined by the "Freddie Mac Primary Mortgage Market Survey". Your rate at the end of the 5 years is determined based on what this index is on the day you START your loan modification. So, in our example of Mr. and Mrs. Smith, if they started their loan modification this week - then at the end of their 5 years their new fixed rate would be 5.00%. This new payment after the 5 years is still a savings of $100 per month from the payment they started at and this payment is fixed for the remaining life of the loan which would be another 20 years (20 years times $100 per month is another $24,000 in savings). To sum up our example, Mr. and Mrs. Smith are able to save over $40,000 by applying for their loan modification.
Over $40,000 sounds too good to be true. The fact is that most homeowners will not bother to take the time to see if they qualify (uh didn't I say: free qualifying consultation here). Many homeowners, even when they find out they will qualify will get lost in the paperwork or be overwhelmed by the paperwork and not get approved. Find a reputable company (like www.nationalcreditfixers.com) who will help you find out if you qualify and then if you wish will take care of the paperwork for you for a small fee.
Still wondering how your lender will benefit and why they want to approve you? You can read all the details of the bill at www.financialstability.gov but if you want a summary of the incentives here they are:
Loan servicers will get: (every loan has both a loan lender and a loan servicer)
1) $1,000 for each loan modification done
2) $1,000 per year per loan mod that stays in the program - for up to 3 years
3) $500 upfront bonus if the loan is not currently delinquent but can document that the borrower is in "imminent" danger of being foreclosed.
Loan lenders will get:
1) $1,500 one time bonus payment for any modification made while a borrower is still current on mortgage payments.
Every loan has both a loan lender and a loan servicer. It is possible your loan lender and servicer may be the same company but often they are different companies. An example would when you make your mortgage payments out every month to Bank of America but the loan itself is owned by Federal National Mortgage Association (Fannie Mae). Most people are not aware of who their loan is actually owned by but everyone knows their servicer because that's who you make your check out to!
Borrowers will get:
1) $1,000 principal reduction payment per year for up to five years as long payments are timely.
2) A front enddebt to income reduction from 38% DTI to 31% DTI for a 5 year term. If the current DTI is greater than 38% it is the current lenders responsibility to get the front end down to 38% before the government will kick it down to 31%. If the back end DTI (debt to Income) is greater than 55% then the borrower will have to obtain debt counseling. The DTI reduction is accomplished by reducing the borrowers interest rate for a term of 5 years. This reduction can not be below the floor rate of 2%. After the five year period the rate will increase at the rate of 1% per year until it hits the interest rate cap. The interest rate cap is the lesser of the original fully indexed and fully amortizing contractual rate (it's never going to be this) or the Freddie Mac Primary Mortgage Market Survey for 30 year fixed as of the modification date (it's almost always going to be this).
If I may be of assistance to you, your family, co-workers, or your friends in obtaining a loan modification, please do not hesitate to call upon me!
:)
Matt Listro
Toll Free: 888-NCFIXER (623-4937)
Toll Free Fax: 888-FAX-4020 (329-4020)
Local: 860-282-6181
330 Roberts Street 4th Floor
East Hartford, CT 06108
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