Potential Loan Modifications:
- Loan balance reductions of up to 20%
- Interest rate reductions to as low as 1%
- Payment reductions of up to 50%
- Rate conversion from variable to fixed
- Prepayment penalty waiver
Compensating factors:
- Mortgages that exceed the value of the home
- Delinquent by two payments or more
- Monthly obligations exceed monthly net income
- Variable rate loans that have either recently adjusted or about to adjust
Refinancing Options
The refinancing plan is for Fannie and Freddie loans on properties. The must be occupied by the homeowner. The 1st mortgage cannot exceed 105% of the current home value. That means for a $400,000 home, your total debt cannot go over $415,000. You can still refinance a 2nd mortgage provided the first one meets the 105% requirement.
Cash out options are not available during the refinance, so they cannot be used to pay off other debts. Applications with be accepted until June 2010!
Loan Modifications:
Borrowers may no longer have to be behind on the mortgage to qualify for a loan modification if they fall within the guidelines. Although priority will be given to delinquent borrowers, the main requirement is debt-to-income ratio of 31%. This means that your total monthly dues (including insurance, taxes, and association dues) must exceed 31% of you income, which qualifies you as being in hardship. The loan modification option applies to mortgages originated on or before January 1st.
Your home must also be your primary residence. That means it can’t be owned by an investor or used as a secondary home. The plan also puts a price cap on loans for single-family homes. Homes over $759,750 will not be eligible.
How it Works
The program is voluntary, so not all lenders may be involved in this new program. The government is trying to get most major lenders involved. Several incentives have been put into place to make a loan modification more beneficial than foreclosure.
Basically, the government has offered to split these modification costs with the banks. This would reduce the loss for both parties. Lenders must first agree to cut mortgage payments to meet a 38% debt-to-income ratio. Then the government will pay part of the cost to bring it down closer to 31%.
Servicers also get cash incentives for granting loan modifications. Each modification will earn them $1,000 as well as a $1,000 yearly payout for three year as long as the homeowner stays current. As a borrower, you also get up to $1,000 off your principal every year for five years as an incentive for staying on track. The incentive program starts three months after the new loan term takes effect.
When Should You Sign Up
RIGHT NOW! Sign up as soon as possible, while there is still something in it for you. Even if lenders don’t participate, or if you don’t meet the requirements for state-subsidized modifications, it may still be worth it. Qualifications aside, most lenders would be more willing to work out better loan terms than seize your home. This is because they lose as much in a foreclosure as you do, so except in rare cases, it usually makes more sense for them to modify your loan than to foreclose.
This is also true for loans owned by other investors who appear to be owned by services. If you’re currently in a specific contract with an investor, the guidelines may not directly apply to you-but that doesn’t mean loan modification isn’t an option. Again, if loan modification makes more financial sense, lenders would be more than willing to meet you halfway.
What You Need
Since most borrower information will already be filed with lenders and services, paperwork shouldn’t be much of a problem. The process should be a lot smoother than last year. Last year a lot of homeowners were scrambling to get loan modification deals. Lenders will need to see your latest tax return and at least two pay stubs to prove that you can handle the reworked costs. As with traditional loan modification, a hardship letter (in this case called the “affidavit of financial hardship”) is also required and will be verified by proper authorities.
Homeowners in Bankruptcy
Bankruptcy and active mortgage litigations shouldn’t keep most borrowers from qualifying for the program. Filing for Chapter 13 Bankruptcy may allow you to get a principle reduction of your mortgage in court, as long as you can prove you’ve tried other options beforehand. If you’re currently in litigation over your mortgage, you can get it modified without losing your legal rights.
Getting the BEST results!
Working with a third-party law firm can greatly increase your chances of getting your loan modified. As load modification requests pour in, lenders will be overloaded. Homeowners may be declined even for the most straightforward applications. A load modification attorney can help you tailor your request to suit the requirements of your particular lender for a higher probability for success. They can also help you explore other options, such as bankruptcy and short sales, or better strategies for settling a loan modification with the best!
Please Contact Dominic Noia for more information on this program!
Domenic Noia
Mortgage Consultant
United Mortgage Services
2055 W Army Trail Rd., Suite 100
Addison, IL 60101
Desk- (847) 850-7207
Cell- (630) 386-6096
E-Fax- (847) 850-7206
