Wednesday, September 24, 2008

Loan Modification FACTS

Explore Loan Workout Options:
If you have an Adjustable Rate Mortgage that is adjusting or have missed mortgage payments which has impacted your ability to refinance, you still have options in this market. Your lender may offer several 'loan workout' options including but not limited to: reinstatement, forbearance or a new repayment plan to suit your situation. When you call your lender directly ask for a supervisor for best result!


FHA Rescue and Secure Plans FHA officially offers a range of options for people needing to get out of ARM loans or who may be in arrears. Not all lenders offer these plans. Even FHA is teetering on risk based pricing hits (translated: higher interest rates) to encourage lenders to fund these loans. Certainly you should speak with an FHA licensed broker or bank about whether you will qualify. Officially the FHA has advised they perfer no FICO score or a minimum of 500. The banks who fund FHA loans have very strict loan limits (by city/county) and very few will fund under 580 FICO scores. Unfortunately, with guidelines tightening on all fronts, alternative credit reports are no longer acceptable in this market.


Mortgage Modification For longer term issues impacting your ability to afford your current mortgage, you are advised to pursue mortgage modification with your current lender. Mortgage modification may work by adding missed payments to your current loan balance (to bring it current) or change an adjustable rate to a fixed rate or by extending the number of years on your loan, thereby lowering the payment within your means.

Mortgage Insurance Loan: If your mortgage is insured (via Mortgage Insurance) you may qualify for a one-time interest-free loan from your MI guarantor to bring your account current and pay it back within a certain time frame. Your lender handles this process since they are essentially the insured party.

Loan Modification Resources: There are many companies out there who will help you work with your lender to modify your loan for a fee. These are legal negotiators whose fees range into the thousands. Your success depends on your circumstances and you ability to negotiate effectively with lenders. Professional modifiers have the inside story with lenders.
In Washington State, our DFI has proposed new rulings that only Licensed Loan Officers and Brokers can offer this service to protect consumers. You should not have to pay more than $500-1000 up front. If they don't get an acceptable result, you should get your money back less an application fee. Most llenders are very motivated to keeping people in homes. They do not want your house back.

Private Options: I've been speaking with several private lenders about options to refinance out of situations.... but they are very strict on minimum credit ratings in this market. Most private lenders want hefty fees up front and interest rates starting at 10% for higher risk loans. Since some ARM loans are already adjusting higher than that, a private lender could be a very decent option if you are in too deep to have your loan modified.

Non Profit Counseling Hotline: For borrowers in arrears or nearing a rate reset they know they cannot afford, call Hope Alliance's hotline. Hope Alliance is a non profit HUD sponsored counseling organization who will help you determine the parameters of your situation. After which , they will petition your existing lender on your behalf. The lender will then respond directly to you, after which you are on your own to negotiate.
Call Hope Alliance 1-800-995-4673  www.995hope.org
The Hope Alliance fee is paid by the lender if successful, so there is absolutely no cost to you.

BUT FIRST If you are not sure how to proceed, the first step is to ask your lender directly about potentially working out a solution.

Before you call, read about your options online at the HUD site.
http://portal.hud.gov/portal/page?_pageid=73,1827467&_dad=portal&_schema=PORTAL

Success to you! Loannetter