Upside Down Mortgage

Archive for April, 2008

Mortgage Modification Success Stories

It seems within the past two years the phrase 'refinance' has been replaced with 'loan modification'. The new popularity of this term is causing many homeowners to explore the possibility of lowering their mortgage payments using this technique. When done properly, many have been able to achieve the same or even better results without the expense of refinancing.

Up until recently, it was really unknown as to the criterion banks were using to evaluate loan modifications for approval. As time passed and the popularity of modifications exploded, a consistency in the approval process became evident. The calculation or formula is called the DTI (debt to income) ratio. The DTI is the relationship between an individual's monthly income divided by their monthly expenses. The magic number is somewhere between 31%-40%. Basically, for a loan modification to be successful, your bank will be comparing your monthly income against your expenses. Keep in mind that your income is represented as gross, not net. If you can demonstrate that at the least 1/3 of your gross monthly income is used for a living expenses (including your housing payment), you are on your way to a successful loan modification.

To calculate this formula, your bank will require you to complete a monthly budget. Here you must itemize your expenditures each month. The entries will include food, gas, utilities, credit card payments, medical expenses, etc. In addition, you must validate your income by providing pay stubs and tax returns. You can experiment with the numbers on your own before you submit them to get an idea of your potential eligibility.
A few words of caution with regards to qualifying for this process. Don't make the mistake of grossly misrepresenting your monthly expenses too high in an effort to convince the bank to significantly reduce your mortgage payment. Although it might appear to make sense, it will not work. If your DTI ratio is too high, the bank will simply deny your modification. This reason for this is because, in some cases, the bank might feel that even if they reduce your payment it might not be enough to solve the problem and they are only delaying the inevitable, which is foreclosure.

You have many other options and some versatility when preparing your financial analysis and constructing your DTI ratio. Many times if your qualifying ratio is too high, you can offer the bank a notarized letter from a family member who will offer financial support. This can dramatically improve your qualification if your income is too low. Remember to ask these questions in the very beginning of the process. There are many other options as well to help keep that DTI ratio in line and maximize your chance for approval.

In addition, your bank will need some other information from you. One item will be a financial hardship letter detailing the events leading up to your request for a modification. Was it the loss of your job? Was it a reduction in income? Did you have unforeseen medical expenses? Basically, you need to explain why you were able to pay the mortgage before and why you are struggling now.

Naturally, there are other factors involved in getting approved for a loan modification. However, they are secondary to the DTI calculation which is the most important element in the preparation of your case. If the numbers don't make sense to the bank, they will deny your loan modification regardless of how well you have constructed a hardship letter and prepared the other elements. You get one chance to present you story. You have to get it right the first time.

The bank really does want to help you but it must make sense for them too. Although it might be emotional for you, it is very scientific for them.

Once you have a basic understanding of these guidelines, your chances for a successful loan modification are greatly improved. My do it yourself guide will provide you will all of the tools to maximize your potential for a successful loan modification.

About the Author:

J. Pisicchio is a mortgage professional with 20 yrs industry experience. Working at small banks & large institutions (Chase), he was formally trained as a credit analyst. His goal is to help consumers make the best financial decisions regarding their mortgage needs. For information on the
Do It Yourself Modification
guide, visit

www.mortgageloanmodificationsecrets.com

Article Source: ArticlesBase.com - Loan Modification Formula Finally Revealed

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Residential Mortgage Fraud Act

Home buyers rejoice! Good news has come for the housing market! On November 5, 2009, The Worker, Homeownership, and Business Assistance Act of 2009 extended the tax credit available to first time home buyers, in addition to adding in a new credit for existing homeowners.

What does this mean for home buyers? It means an excellent opportunity take advantage of a limited time offer! Here is a quick breakdown of who qualifies for each credit and what the rules are.

First Time Home Buyers

For first time home buyers, i.e. buyers who have not owned a principal residence during the prior 3 years, the credit of 10% of the purchase price up to a maximum of $8000 has been extended and now allows these buyers to take advantage of the credit through April 30, 2010. An extra bonus is that those buyers with binding contracts as of the April 30 deadline will have until June 30, 2010 to actually close. The income limits have also been raised with the extension. For single buyers, the annual income limit is $125,000. For married buyers who file joint returns, the limit is now $225,000. Keep in mind, for married taxpayers the law tests the homeownership history of both the home buyer and his/her spouse.

Existing Homeowners

New to the Act is a credit for buyers in the “trade in” or “move up” market. Now, home buyers who have owned and resided in a home for at least 5 of the last 8 consecutive years are eligible for a credit of 10% of the purchase price up to a maximum of $6500. And even better, the new home purchased does not have to be a more expensive home to qualify, which is great news for those who are empty nesters or who may be downsizing. The annual income limits and homeownership history for these “move up” (or “move down” in some cases) buyers is the same as the first time home buyer.

Common Ground For Both Plans

The rest of the rules for qualifying are the same for both tax credit opportunities. Homes that qualify for the credit include single family residences, town homes, condominiums, manufactured (mobile) homes and houseboats. Additionally, the home being purchased must be less than $800,000. The home purchased can be either new or resale, but there are exclusions. The home cannot be purchased from a family member, ancestor (parents or grandparents), lineal descendant (children or grandchildren), a spouse or spouse’s family members.

Since fraud had become a problem with the prior Act, the new law also contains anti-abuse measures. Included in these changes is a rule that most buyers must be 18 or older, and the credit may not be taken if the buyer is claimed as a dependent on anyone else's tax return. Also, proof of purchase of the home must be furnished for the buyer to qualify for the credit.

This is a great opportunity for home buyers across the board. The available tax credit, combined with still low mortgage interest rates, should continue to help spur housing sales. This of course means good news for everyone in these trying economic times where we have seen record setting numbers of foreclosures in the housing market. Just remember, this extension is likely the last one so act quickly!

Lorena O’Connor is the Team Manager for The Graham Group, a premier team of real estate professionals specializing in Atlanta Real Estate. She works under the direction of Broker/Owner Lee Graham, and their areas of expertise include Residential, Foreclosures, and Short-Sales. View more information at www.GrahamGroupAtlanta.com.

About the Author:

Prior to beginning his career in real estate, Lee founded a successful insurance agency in Danville, KY. In 2001, he co-founded Avenues of Atlanta Realty and became a Multi-Million Dollar Producer from 2001 to 2003. He received his broker's license in 2004 after co-founding Weichert, Realtors-Premier. His successes as a Realtor contribute to his credibility as a leader of his Company's agents. His most recent activity includes the founding of The Graham Group, specializing in Atlanta real estate.

Article Source: ArticlesBase.com - US Senate and House Passed the Home Buyer Tax Credit Extension!

Miami Florida Attorney - Lawyer Dania Fernandez www.FloridaLawAttorney.com Real Estate Spanish #33

Loan Modification American Servicing Company

If you watch the news on any given evening you are almost certain to see a story regarding the current real estate crisis. Foreclosure is a circumstance that many American families are facing and many of them will attempt to modify their mortgage loans by either contacting their mortgage lender and asking for help or paying for the services of a loan modification professional. The question that seems to be unanswerable is which option is best.

The facts are that banks are looking out for their own interests first and the homeowner second. However, in most cases even though the bank does not have your best interest at heart, they stand to lose considerable money if they foreclose. By the time everything is said and done the average cost of a bank reselling a home after foreclosure is in excess of $30,000 and that is only if the recoup the full balance owed on the mortgage. So if the bank stands to lose money through foreclosure and the homeowner stands to lose money through foreclosure, why is it so difficult to obtain a loan modification?

There are several factors that come in to play. Banks were simply unprepared for the real estate collapse and were very slow getting on the loan modification bandwagon. Many homeowners had no idea that modifying their loan was even an option. Many lenders are still dealing with staffing problems and the training of their employees to approve or reject loan modifications. Prior to the Homeowner Affordability and Stability Plan that was announced by President Obama in February, getting a bank to agree to a loan modification had roughly the same likelihood as finding Bigfoot. This was especially true if a homeowner had a Sub-Prime loan.

Even though the government is now pushing lenders to be more cooperative, the system is still running at the pace of a California freeway in rush hour. Thousands of homeowners simply give up in defeat and let the foreclosure happen. After hours on the phone being transferred from one clueless customer service department to another and months of sending duplicate documents to said clueless customer service departments it is easy to understand why homeowners are frustrated and are willing to walk away from their homes.

Below are 5 lies of the loan modification process that will give homeowners contemplating a modification some basic insight as to how to proceed and what to expect from the process.

1. Homeowners can expect to reduce their principal balance to a level that is comparable to current home prices in their neighborhood.

The chances of principal reduction is slim at best, most mortgages sold on the secondary market will allow changes to the terms of the original mortgage, but this is limited to changing the rate, changing the term and changing the loan from an adjustable rate to a fixed rate

2. Chapter 13 Bankruptcy is a better option to keep the home.

While technically this is not a lie, it is worth mentioning that filing a bankruptcy may be necessary in certain circumstances. Many homeowners that file for a bankruptcy only to stop a foreclosure may be better suited to a modification. If you go into a bankruptcy with a ten percent interest rate you will exit it with the same interest rate. However, specialists can modify a mortgage inside of a Chapter 13 Plan if the borrower fits the modification model. Borrowers in this situation cannot modify these loans themselves, as lenders are not allowed to communicate with the borrower once a bankruptcy plan is filed with the courts. These specialists are rare. Few modification companies understand the bankruptcy process at all.

3. If I hire a loan modification company they will take my money and I will lose the house anyway.

As with any purchase it is necessary to examine the reputation of the company you hire. There are many companies that do loan modifications not only successfully, but work very hard to obtain the best terms for their clients. It goes without saying that too many crooks jumped in to this industry looking to make a fast buck. Making sure that the company that you choose is reputable is well worth the time spent researching them.

4. A loan modification company guarantees what interest rate or terms they can offer to you prior to contacting the bank.

This should be a major red flag. While an experienced modification specialist can usually give their opinion as to what terms can be expected, there is no way to guarantee early in the process what terms will be available to a homeowner.

5. It's not possible to do my own loan modification.

This is simply not true. As stated earlier a homeowner can modify their own mortgage, but it is usually a difficult and very time consuming process. Most lenders are only available during normal business hours and you can expect to invest many hours of phone time being shuffled between departments and unless you are a very organized person, many hours of gathering documents that the lender will request. Unless you have lots of free time and some understanding of how financial institutions work, hiring a professional to do the work may save you money and a lot of grief in the long run.

About the Author:

G.P. Hendricks is a published author and has been seen on broadcast television discussing loan modification, bankruptcy, and insurance issues. To learn more about the
Loan Modification
process, visit your One-Stop-Shop for Loan Modification and Financial information at:

HomeSteadRescue.com

Article Source: ArticlesBase.com - Loan Modification - 5 Lies You Need to Know About

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