Mortgage Modification- This term has been getting a lot of attention lately and rightfully so. With millions of homeowners stuck in toxic adjustable rate mortgages and no ways to refinance out of them, loan modifications may be the only way to assist struggling borrowers. This term is used when your lender modifies your current mortgage (same loan you have, only changes are made to the note) in order to work with you and make your mortgage more affordable. A modification to your rate, balance of loan, delinquent fees owed, term of loan etc. can be made by the Lender. In the past this was only used when a borrower was delinquent but now we will see it being used before someone is delinquent. This will be the hottest term and the best way to help people avoid foreclosure.
- A Loan Modification will change the existing mortgage note and give the client a fresh new start in managing their home. Accounts will be brought up to date immediately.
- With a loan "modification" you take the mortgage you now have and change the interest rate and payment requirements in order to achieve a fixed rate. A change in rates and payments does not result in the need for a new closing, legal fees, survey, appraisal, or taxes. In contrast, if you "refinance" a loan you'll be required to have a closing and forced to pay a variety of fees and taxes.
- Lenders are willing to negotiate when borrowers are facing financial difficulties and can't obtain other financing alternatives. Kirkland Young LLC shows the lender why it would be in the lender's best interest to agree to a workout arrangement. In turn, the lender will reduce the loan interest rate, reduce monthly payment amounts or change other loan terms to allow for an affordable loan to allow the homeowners to avoid foreclosure.
The Federal Reserve's plan for Mortgage Modification
The “Homeownership Preservation Policy,” will specifically target $74 billion in mortgage assets the Fed acquired as part of last year’s bailout of Bear Stearns and American International Group and will allow the Fed to extend mortgage loan modifications to homeowners who are 60 days or more behind on their mortgage payments.
This is the first step the central bank has taken under the TARP law to help prevent foreclosures and to “promptly” review mortgages that would qualify for modification. Already, 850,000 homes have been foreclosed on and another 1 million homes are expected to be at risk of foreclosure in 2009.
Principal Write-Downs Key to Program’s Success
Eligible homeowners could see their interest rates lowered, their loan terms extended, or their principal loan balances reduced if the loan adjustments would offer them “a better long-term payoff than foreclosure.”
Unlike other third-party lenders who offer mortgage loan modifications, the Fed will specifically push for principal balance reductions under its own modification program, especially for those homeowners who owe more than 125 percent of their property value. Private lenders who have been doing home loan modifications have been reluctant to reduce principal balances on mortgage loans because of the potential revenue loss for the lenders.
Wells Fargo Modification
Program Extended to Wachovia Customers
Wells Fargo announced today that its home loan modification program
will be available for 478,000 Wachovia customers acquired via the merger
completed earlier this month.
That includes scores of borrowers trapped in nasty Wachovia Pick-a-Payment
loans, the high-risk loans that sunk the too-big-to-fail banking giant
months earlier.
.
For those at-risk, we will offer combinations of term extensions of
up to 40 years, interest rate reductions, charge no interest on a portion
of the principal for some period of time and, in geographies with substantial
property value declines, we will even use permanent principal reductions.
Court-supervised loan modifications can preserve your home
Over the next several years, two million American families will lose their homes—roughly 20,000 each week. Because of market declines, these struggling homeowners can neither refinance nor sell their homes. Unless their mortgages are modified to align the loan amount with the value of the home, the foreclosure crisis will continue to get worse.
The damage of foreclosures extends beyond the families who lose their home: 40 million of their neighbors could also lose billions of dollars in hard-earned wealth as home values decline.
There is an effective solution. Congress has lifted legal barriers that prevented struggling homeowners from seeking loan modifications through the courts.
Helping Families Save Their Homes in Bankruptcy Act of 2009. permits the Bankruptcy Court to modify the priniciple of a Primary Residece, under certain conditions,to prevent foreclosure.
Congressional leaders to support court supervised loan modifications in bankruptcy as set out in S 61 and HR 200, provided legislation to accomplish three things:
Eligibility
- Relief covers only existing loans (not loans made in the future);
- Bborrowers are required to certify that they have attempted to work out an acceptable solution with the lender or servicer; and
- The Bill provides for the forfeiture of lender claims only where the lender has violated certain provisions of the Truth in Lending Act.
Limitations
Relief is available only to homeowners who would otherwise lose the home in foreclosure and who have sufficient means to sustain a market rate mortgage.
- The downside to lenders is circumscribed: interest rates must be set at commercially reasonable, market rates;
- the loan term may not exceed 40 years;
- the principal balance may not be reduced below the value of the property.
- The judge must be satisfied of the homeowner’s good faith in seeking relief.
- the homeowner must subject herself to the supervision of the bankruptcy court for a three to five year period, during which time she can make no expenditures beyond limited allowable living expenses, and incur no credit card or other debt, without court supervision.
Mortgage Modification / Mitigation Questions
- Are you one or more months behind on your mortgage? (You can still qualify if your rate will increase within the next 90 days.)
- Did you experience a recent hardship that caused you to be late on your mortgage payments?
- Are you now out of that hardship or will the rate reduction resolve your hardship?
- If seeking Loan Modification or Loss Mitigation, will you be able to afford your monthly payments and other monthly expenses once the Loan Modification or Loss Mitigation is completed? (Be as honest as possible with this last question. You do not want to enter into a new loan that you cannot realistically accept.)
If you can answer yes to all of these questions, you may qualify for Loan Modification or Loss Mitigation.
Foreclosure
If you have been served with a complaint to foreclosure on your home, your options are limited. First, you can negotiate with your mortgage company to reinstate the mortgage. Secondly, you can file under Chapter13. Thirdly, you can sell your home or attempt to refinance. Fourthly, you can give up and get out of your home. Finally, you can fight the foreclosure.
The first two options assume that you can afford your current monthly payment, and selling or refinacing your home may be impossible if you have little equity or even negative equity.
Many homeowners, especially those with subprime mortgages, can no longer afford the mortgage payments, even if the mortgage were current. That makes a Chapter 13 bankruptcy possible under the,
A Bankruptcy Attorney can help, even if you are behind on your payments, and cannot afford the current monthly payment. As under the new law a Judge in Bankruptcy Court can now modify the principle on your primary residence.
United States Bankruptcy Courts
Bankruptcy cases cannot be filed in state court. Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan.
Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation. These procedures are covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the three main chapters of the Bankruptcy Code, which are Chapter 7, Chapter 11, and Chapter 13.
Helping Families Save Their Homes...
Information
Source: U.S. Bankruptcy Courts
