The following article is the contents of an answer that I gave to another blog contributor today.
I would love to hear any comments from other professionals who are helping homeowners to keep their homes by way of a Loan Modification.
A "modification" is the end result of negotiating with the current lender or investor for a home loan that isn't working well for the homeowner.
Those homeowners who are facing foreclosure do have an option that is finally getting some attention from the public and the lenders themselves. That option typically means that the current lender may bring the interest rate down, fix an adjustable interest rate, reduce the amount of the loan, or allow the homeowner to add one to four house payments to the back end of their loans.
Many owners cannot refinance their adjusting ARM loan. They have made their payments on time and have good jobs. However, they've had a few late payments because the house payment soared upward by $600. This homeowner is a great scenario for looking into a load modification. The lender will typically want to avoid foreclosure, so a modification to the original loan is in everyone's best interest. This is just an everyday scenario, there are many others.
I like to recommend that an owner check out loan modification first. If that clearly will not work out, then consider a short sale. If a short sale will not work out, then letting the house go to foreclosure may be the only option available to the owner.
There is a method for dealing with staying in a home during the foreclosure process. That would take another long post.
Back to our original topic:
Hi SoCalGal:
It's great to hear from you. I hope that you will share your experiences in this area with me. I am always interested in knowing what others are working on.
On Sat, Jun 21, 2008 at 8:24 PM, (e-mail address not provided) wrote:
SoCalGal has posted a response to your message titled
Re: Do I tell the bank I want to go in foreclosure???? in Foreclosure Discussion.
The posted reply can be found at the following URL:
http://www.all-foreclosure.com/forums/foreclosures/messages/7710.html
If the reply pertains to an ongoing discussion, it is
requested you go to the above URL to post any response.
The posted reply reads as follows:
Dated : June 21, 2008 at 20:24:41
Subject: Re: Do I tell the bank I want to go in foreclosure????
Mary, can you tell us under what circumstances the lenders are reducing loan balances?
My response:
Hi SoCalGal:
Thanks for writing!
To answer your question: Any loan balances being reduced are usually due to the property being at the highest risk of foreclosure and what that foreclosure will do to/for the investor. Where it is on the lenders' books is another factor. The number of requests for a reduction will also give the investor the current "climate" of the market.
An example:
A million dollar home that has lost 30% of its' value: a borrower who made the fixed period payments on time, who wants to remain in the home, and who has steady income.
Those factors would make it easier for a lender to write down part of the mortgage loan amount to avoid the average foreclosure costs and to avoid the loss of income on the note for a period of six to 18 months.
Any file submitted to the investor/representative of investor must "stand on it's own". The negotiator for the modification must present a clear picture of where we are today, what the cost of a "No" answer will have on the investor, and what the Borrower can live with.
This is an example of a scenario that did work for a balance reduction. A write down between 5 to 25% of the note with a borrower who is capable of performing NOW keeps a foreclosure off the lender's default list and makes the lender look better to the investor. I am not going to disclose the exact amount of the write down, but it was more than 5% of the mortgage balance. (Your mileage may vary)
This is NOT standard operating procedure. Having said that.......one could act "as if it was" when approaching the lender and being willing to wait for an answer without caving in. In my humble opinion, that is the hardest part for the property owner, which is why a representative for the owner is the best idea. A good one will pay for himself with good negotiating skills and presentation of the borrowers information which will ultimately "pay" or save the owner on his loan.
Our processing unit has been successful in the above scenario. Please remember that this is not a typical case and that each scenario for each homeowner should be reviewed by a professional with a history of mortgage and real estate expertise. This person must also represent a company history of good performance and service.
There are many Loan Modification "experts" popping up to help people with their homes. No license is required. Please check them out before you sign any contract or pay any fee. Don't give your property up to ANYONE without the advice of an attorney that has been referred to you by a trusted source. Remember, that if the homeowner has been advised by their lender with a Notice of Default, that it is a felony to accept a fee from the owner until an agreement has been obtained for a loan modification or forbearance.
Standard Disclosure: Please seek individual, professional advice in your personal situation. This article is not intended to advise or counsel any particular person. It is to be used as notice of current events. The above article is authored by Mary Supinger and is protected by copyright laws. Credit Fitness is a registered trademark of www.CreditFitness.net.
