There have been numerous modifications to the field of loan modification since it was first introduced around 2007. Most important was the methodical elimination of fraud-prone service providers who established their businesses to profit off homeowners who are in financial distress by charging an upfront fee and then not doing anything. I’ll reiterate this point repeatedly because it’s the most important thing that you need to be aware of when searching for the modification of your loan: DO NOT make a payment up front to get a MODIFICATION TO A LOAN!
Who is able to discuss a loan modification?
You is right. Although it might be beneficial having a professional guide you with the process, there’s nothing stopping you from making an adjustment to your loan by yourself.
Foreclosure ConsultantThese generally are professionals who are not licensed and may be employed by non-profit or profit companies. On July 1, 2009, within the State of California All foreclosure consultants have to be registered by the Attorney General’s office and have a security bond of $100,000. (California Civil Code, section 2945.45).
Attorney – Any attorney who is licensed in the state in which your foreclosure is situated. You can search for the entire list of attorneys registered by searching martindale.com
A Real Estate Agent or Broker- The most commonly used source of advice and assistance in negotiating loan modifications or a short sale. While some real estate agents have the necessary experience to be considered as specialists in their area, they are permitted to assist if they have the current real license to sell real estate. Find out whether your broker or agent is licensed by visiting the California Department of Real Estate website dre.ca.gov
Beware of fraudulent loan modifications. How to recognize foreclosure fraud.
If you don’t see this in the beginning paragraph, DO NOT PAY to the lender in advance for a loan modification! In California this is a crime. It’s important to keep in mind that if something sounds too appealing for it to be real, then it most likely is. Like a declared income loan that has an “starting” interest rate that is astonishedly low, loan modifications with terms that don’t meet the sniff test is also likely to be false.
Below, I’ve listed some of the most popular loan modification scams to look over and catalogue:
I’ll start by mentioning the loan modification counselor who demands for a cost BEFORE you’ve obtained an PERMANENT modification to your loan. It’s the same thing again: Do not pay up front for A LEND MODIFICATION!
The foreclosure expert who instructs you to make your monthly payment to them instead of your bank in the process of loan modification. This shouldn’t happen.
The consultant that poses as an official government-affiliated entity. Sometimes, they use names that imply they’re government-related and insisting that you pay them in advance to be eligible to be a part of one government programs like HAMP as well as HAFA. These organizations will say that their business is connected to the program, and will require you to prove that your eligibility. Your lender will let you know whether you qualify for HAMP without charge. It is also possible to view below the HAMP waterfall below.
Bait and Switch “rescue loans.” It is essential that all parties be aware of the terms they’re signing. Bait and switch loans may require homeowners to surrender the title to their home to an unrelated person in exchange for modified loan that has an enlargement of the loan. If it seems too promising to be true, it probably is…
Leaseback and Rent to Own schemes. Be aware of whom you’re dealing with, and be sure to not to transfer title to individuals or firms who ask you to sign a contract with the promise of selling the property back to you after the process has been completed. This could include asking the homeowner to leave to allow an “consultant” to collect rent until the property is eventually put to foreclosure. In this instance, the consultant does not complete the modification, but they delay foreclosure, which allows them to take rent over longer time.
An addition to this list is the CA Attorney General’s press release: be wary of an audit of your loan that is forensic. In this case, the consulting firm uses the forensic loan audit to serve as way of obtaining the homeowner to pay early for the tools required for their modification in this instance, an forensic loan audit. After the cost is paid, the work is not completed or the mortgage modification is never completed.
What should you be aware of before you go in. What are your odds of being successful?
The foreclosure process can be extremely stressful and, at times, overwhelming. Homeowners in many cases are willing to put aside their the reality of their lives, and try everything and believe anyone who says that they will allow them to remain at home. The reason for this confusion in the process of loan modification can be the reality that a lot of homeowners who were in default took out declared loan income to finance their mortgages or buy their home. Each homeowner must be aware before entering the process of loan modification that they must have an income in order to be eligible for loan modifications.
It is important to reiterate that if you can’t prove an income that can pay for you mortgage (that is a reduced mortgage) then you won’t be eligible for an extension on your loan! Additionally, even though the lender may have believed you to be a good person for that when you were able to get the loan, they’ll require documentation and verify your income prior to deciding to alter the loan. The general purpose of a loan modification is to reduce your monthly installments by a sum equal to 30% of your gross income.
Banks will also require an issue before you can request the modification. The most common hardships include divorce or death of an income source such as a job loss or earnings, relocation in search of work, or an imminent interest rate increases. They won’t modify your loan if it is your intention to refinance when your income will be sufficient to cover the monthly installment.
The banks will then require you to use your savings before considering altering the loan. Two points to be aware of First, some of your retirement accounts are not allowed due to ERISA laws, which means banks cannot pursue these accounts or force you to take them out of liquidation to pay mortgages. It is also generally accepted that banks will require that a homeowner be less than two and one-half times their monthly payment before they alter the loan. In other words the case where your monthly home mortgage was worth $100, and that you held $250 on your account for savings (2 half of your monthly amount) then the bank will expect you to make use of that cash prior to modifying your loan.
One last note regarding this topic, consider making an application an application for loan modifications to delay a foreclosure or short sale. Nearly everyone can obtain an interim modification from their bank. The reason for this could be that the lender wants to collect on a bad debt for the purpose of evaluating their capacity to collect. Banks are likely to seek every financial detail that you supply to recover the debt. If you’re falsely or hopelessly creating a case for an extension by proving assets and income, this information could be damaging to the short sale negotiations.
The unwelcomed loan modification offer from JP Morgan Chase
Certain events in the past have been deemed mythical: The Fountain of Youth, the contents of the vault of Al Capone. The current housing market, which is in decline, is awash with the unwelcome loan modification by Chase WAMU. Dear readers, it is my pleasure let you know that it is in existence. This is accompanied by a note by Steve Stein, head of the Chase Homeowner Assistance Department (I haven’t been able to find a link for that department’s page on the Chase website, but the number on the website is (888) 368-5524) The offer was accepted and was accepted by my client who lives in Southern California.
According to Chase documents the document states that the documents state that her “loan is eligible for (the) special program developed as part of Chase’s announced effort to preserve home-ownership in America.” My client claims that, as of she has not had any contact with Chase for a loan modification or modification, nor has she ever fallen behind or missed any of her mortgage payment.
When I reviewed the deal with her I discovered that she was over 100 percent underwater on the loan (previous amount of $600,000; the estimated value of fair market of less 300,000) and that her rate of interest was set to be reset for the next month. This was also an owner-occupied property with a stated income option arm or adjustable rate mortgage. The Chase modification changed her interest rate at 5 percent for the term of the loan. They also set the amortization period to 30 years after the modification date and, wait for it to …. decreased the principal balance by about $250,000.
My reason for getting this out to the world is threefold The first is to be aware of the calls and letters made by your current lender. While they are mostly collections calls Some lenders are actively seeking to help homeowners to modify their loan. Additionally, I’ve received numerous calls from customers regarding similar offers but found limited information about these offers on the Internet or other sources. I’d like to share my experience of success to show you that these opportunities exist.
Last but not least, I would like to highlight that principal reductions are crucial as a way to solve our current financial crisis (just in case bankers and politicians are listening). In the above example my client, she is in her mid-sixties educated, had perfect credit and was aware of the market value of her house. Similar to many homeowners in similar situations, she’s accountable and proud of the attention she pays on financial obligations. Therefore she was reluctant to seek help when she was able to pay and was morally opposed to the idea of a deliberate default.
Once the process was finished, she spoke about the anxiety the anxiety that came with 2 years waiting to see her monthly payment to increase, recognizing that she was not able to refinancing her loan into an interest-only loan and knowing she wouldn’t be able to buy or sell a property to buy. The modification to her loan took an hour to go through with an attorney and 15 minutes to finish the paperwork which was included in the package delivered by Chase and was finalized and approved prior to her next payment being due within 15 days of receiving the package.
Finding the Greater Good
I believe there are two approaches to tackling any obstacle. One option is to be prepared and make a conscious effort to minimize the negative consequences you might personally experience; the other is to actively seek out ways to remove the obstruction and work towards the benefit of the entire community. Anyone who has watched the film A Beautiful Mind, realizes that John Nash won a Nobel Prize for his game theory, which suggests that strategies like these result in the best result.
Like the millions of Americans with a mortgage that is underwater, home My client was hesitant to confront the issue until it was urgent and had a low chances of solving. Banks need to minimize losses and boost revenues. As Chase and other institutions expand the loss reduction as well as REO divisions by hundreds of thousands to deal with foreclosures, short sales and a flood of modification of loans that might not be successful, it only just took one letter sent via certified mail to approve the loan modification process that needed no proof of income, and no explanation of hardship, and for no back and forth discussions. President Obama and our current Administration are committed to assist homeowners remain on their property and prevent fraud, keeping fraudulent foreclosure scams out of business, and bringing an efficient solution to the current housing crisis. The task was completed in just a few hours for one customer thanks to Chase’s proactive reaction to the challenge before them as well as a reciprocally beneficial plan that benefits the entire community.
This change would not have been possible without the reduction of the principal. In doing this, the bank lowered their losses and also positioned the loan for higher chances of repayment in addition, they prevented another foreclosure, thereby reducing the negative effect on their neighborhood as well as their loan portfolio , which is a good thing for the housing crisis overall.
As with all financial matters A loan modification shouldn’t be handled lightly. The chances of success must be assessed prior to deciding. The banks are collectors of debt, and they’ll make use of the information you supply to collect the amount. If you submit false information to show the ability to pay, which isn’t the case, it could be used against you in the event that you later decide to go after an offer for a short sale. One last moment, NEVER PAY UP in advance for a loan modification!