Congress has set aside more funds to help homeowners avoid foreclosure -- because it's good for banks!
We are not complaining about a promise of more than $100 Billion in TARP money going to banks to help homeowners avoid foreclosure right now. These funds are sorely needed to stop this train now wrecking many American homes. The TARP Congressional Oversight Chairman, Elizabeth Warren, has been keenly advocating for transparency in this regard. She and her Harvard team have a pretty big job.
Watch this fascinating interview with Professor Warren as she explains why the 'tricks and traps' model of banking must come to an end if we are to survive the shift in our economy. Warren is spearheading a new Consumer Finance Protection Agency, whose charge is to be the champion and watchdog for consumers and keep taps on banking instruments: http://link.brightcove.com/services/player/bcpid1827871374?bctid=50351536001
She boils down the jargon and muses on how the family has been abused by this economic crisis. Since most people can't figure out the difference between loan and credit products it stands to reason there is no real ability to make wise choices. For example, have you tried to make sense of the recent letters your credit card companies are sending out advising how they are going to raise your rates and fees? Warren proposes this new CFPA demand short readable contracts that people can understand in four minutes, not forty pages.
A Consumer Financial Protection Agency as a watchdog organization is all well and good if we set up oversight panels outside the banking system. Unfortunately, our banking system is propped up by the Federal Reserve, who are in control. Banks and Brokers are after all, the the minds who created the complicated Credit Deriviative Swaps with NO oversight that got us into this mess. Who do you think makes the biggest contributions to your Senators and Representatives politcal campaigns? Big Banks ARE the decision makers and they ARE the Federal Reserve. Many argue the Federal Reserve is an illegal institution. Many argue that such decision making powers should never be in the hands of the very institutions who are benefitting from those decisions. So who set this up? Your Congress. Your Representatives, who in many cases are very close to, or are themselves wealthy insiders in our government and private institutions. The principle of checks and balances of separate powers has gone awry.
Meanwhile, in a kind of slight of hand, some very interesting ideas to benefit small business are being floated by the likes of Goldman Sachs and Warren Buffet. They have recognized a gap in available funding (by banks) and are proposing to create loan funds to help small business because of how banks have turned their back on the little guy. Sounds great, huh! You can bet your booty their generosity is being funded by our tax dollars. And while this sounds like very needed help for small businesses, please appreciate the only reason a Goldman Sachs or Warren Buffet does anything is to make money. Fine. They should make money, just as anyone should, for providing a valuable service. Let's just keep a close eye on this one, shall we?
Warren asked: "How do we liquidate 'too big to fail' Banks?" One way would be to simply cut them off. We become wise to their game. We understand the price of our decisions to borrow money. We don't let the system enslave us. We take control of our money. We use our money to serve our reasonable needs, not bad decsions that enslave us to a kind of debt death.
Rest assured: America's most highly paid crafty minds are working on the next method to 'trick and trap' people into paying more for something than necessary so they can get richer. How do we avoid being the trapee? It's up to every citizen to make an effort to learn about every financial decision they make. About every credit card, every car loan and every checking account statement. Yes, it's come to this. Either we become aware of what we are 'buying' when we agree to such repayment systems, or we will have to stop using these things and return to a cash or barter economy.
Fortunately, there are many easy ways to get a grip. Everyone can establish a budget. A plan to keep an eye on where our money is going is the first step to better choices. A colleague mentioned his '7 jars' system. You literally use seven jars to save and budget your funds in a cash system. It's very visual and powerful. Or try this free Monthly Spending Planner: http://www.mgichome.com/pdf/monthlyspendingplanner.pdf
Of course, once you do get a grip on where your money is going, if you are serious about it, you can really take control of your money. There are lots of more sophisticated ways to manage your money. You could hire a bookkeeper or learn a financial software program. For homeowners, we highly recommend Speed Equity, an online system designed to show you the power of your decisions in paying down your mortgage and saving thousands of interest. The principle is very simple. The practice takes practice! Susan's offer is for a one year trial and a copy of Mr. Gills book: How to Own Your Home Years Sooner. It's a departure on this blog to offer a product. It's so good we want everyone to know about it. We'd be very pleased to hear your success stories!
Ahhhh, success! Remember the good old days when Banks and Building and Loans were seen as a means for individuals to pool their resources and grow their communities for the common good? Remember the old Frank Capra Christmas movie: It's a Wonderful life? I watch that movie very year. I never fail to cry with joy at the end. Jimmy Stewart as the beloved country banker who is rescued from financial ruin as his community comes forward to save him in gratitude for his generosity...and all is well.
Wouldn't that be wonderful? Equity Talks
© 2009 susan templeton equitytalks
Thursday, November 19, 2009
Thursday, October 22, 2009
More Money to the Big Banks to Help Home Owners Avoid Foreclosure
Recently, Congress identified another $4.7 Billion to assist loan modifications.
Who benefits? You do, hopefully! Home owners in distress who are either in default or eminent default on their home loans (different lenders see this differently) should take heart that our congressional representatives understand the need for home owners to modify rather than risk losing their homes. Currently, banks are being paid up to $5,000 to successfully modify your loan via the Stimulus Plan.
They are being paid to help you, help them to have a 'performing' borrower again and hopefully save everyone a stack of legal fees and corresponding loss of equity and local property values. These additional funds will be used to hire more staff to clear the backlog of applications and provide a smoother and more efficient system of loan modification.
Is loan modification working? As long as they are making more of an effort to assisting homeowners in distress--let's consider this good news, indeed! I would be tempted (if I were mean) to publish a hit list of 'those banks' we have found to be less than constructive in the loan modification process. Suffice it to say, when some folks call and start explaining their circumstances, we may audibly suck air when they mention 'which bank' they are dealing with. Government programs or not, the fact is, once you are in trouble your bank sends your application to their debt mitigators in another department or on the other side of the country (preferably) who may not have 'nice guy' tattooed on their foreheads.
Can you do this yourself? Sure. Go right ahead. Call the non profit Credit Counseling agencies and have them prequalify you on the phone. They will send you along to your bank with a big check on your paperwork. No charge for that. You have every right to modify your loan yourself according to MAA, HAMP, HUD and all the other government acronyms. If you have succeeded yourself, you should shout it from the rooftops!
Why is loan modification failing? I'd have to guess one reason is if you are in trouble now, you may be feeling behind the eight ball in more ways than one. It's very very difficult to negotiate from a position of weakness. The other guy knows they have the upper hand, so to speak and they use that psychological factor to their advantage. The other factor is simply time. The process can take three months or more, so if you anticipate your situation is getting worse, don't wait to start the modification process. If you wait until you are truly financially exhausted, you may not qualify.
If at first you don't succeed, can you try try again? Yes. In many cases, people arrive on the doorstep of a home retention expert after months of attempting to negotiate for themselves with their bank. In a way, it's good you have made the effort. Heck, you realize just getting someone to return your call is a victory. The problem is, once you have started the process, unless you can catch up on your payments right away, the letters from your bank continue to itensify along with the late fees.
Whatever happened to your banking relationship? It may surprise many people to know that while you may have had a relationship with your bank for 20 years and never missed a payment in your life, once you do, you learn the awful truth. The bank you thought regarded you as a valued customer, is NOT even the owner of your loan. They are the 'servicer' and may have sold it to Fannie, Freddie, Ginnie, Sallie or some guy in Hong Kong, and the 'investor' who actually owns your note, is not available to you. Your bank servicing department won't even admit to a home owner that such people exist --so you, the homeowner have no access to the decision maker.
Investors have many faces. They are not in the mood to negotiate with someone who is not making payments. They purposely turn over the messy stuff to their attorneys and collection agencies. These folks will be working some huge stack of paperwork under pressure to move along. That's were the professional can get results where you can't. A fellow professional who knows how to communicate on their level will make better use of their time. '
How does a negotiator get results when you can't? First of all, we are in the lending business and we know the ropes and the motivations of these folks. There's nothing secret about it. We understand they are overworked, underpaid employees of the investor. We get it they want to say yes or no and move on. Check that box. Take a lunch break. Maybe sleep at night.
We make it easier for them to say yes! Your modifier should provide a very concise case, in their language, that demonstrates what you can realistically afford. We enlist their interest in working constructively on your behalf. Our negotiator is a true professional who actually cares about helping folks who deserve a break. As professionals, we also value our reputations and we are bound to operate under very strict regulations: saving your home is a very serious business.
Who do you trust? Now please don't take my blather as advice to head on down to the spammer that sent you a 'save your home' email today. Check out your local home retention expert with the regulatory bodies in your state. In Washington state, loan modifiers must be licensed loan officers or attorneys licensed to practice in Washington. Not all states have this protection. Ask your State Attorney General, Bar Association or local bankruptcy attorney or accountant for a referral.
And hey hey hey...be careful out there! Equity Talks
© 2009 susan templeton equity talks
Who benefits? You do, hopefully! Home owners in distress who are either in default or eminent default on their home loans (different lenders see this differently) should take heart that our congressional representatives understand the need for home owners to modify rather than risk losing their homes. Currently, banks are being paid up to $5,000 to successfully modify your loan via the Stimulus Plan.
They are being paid to help you, help them to have a 'performing' borrower again and hopefully save everyone a stack of legal fees and corresponding loss of equity and local property values. These additional funds will be used to hire more staff to clear the backlog of applications and provide a smoother and more efficient system of loan modification.
Is loan modification working? As long as they are making more of an effort to assisting homeowners in distress--let's consider this good news, indeed! I would be tempted (if I were mean) to publish a hit list of 'those banks' we have found to be less than constructive in the loan modification process. Suffice it to say, when some folks call and start explaining their circumstances, we may audibly suck air when they mention 'which bank' they are dealing with. Government programs or not, the fact is, once you are in trouble your bank sends your application to their debt mitigators in another department or on the other side of the country (preferably) who may not have 'nice guy' tattooed on their foreheads.
Can you do this yourself? Sure. Go right ahead. Call the non profit Credit Counseling agencies and have them prequalify you on the phone. They will send you along to your bank with a big check on your paperwork. No charge for that. You have every right to modify your loan yourself according to MAA, HAMP, HUD and all the other government acronyms. If you have succeeded yourself, you should shout it from the rooftops!
Why is loan modification failing? I'd have to guess one reason is if you are in trouble now, you may be feeling behind the eight ball in more ways than one. It's very very difficult to negotiate from a position of weakness. The other guy knows they have the upper hand, so to speak and they use that psychological factor to their advantage. The other factor is simply time. The process can take three months or more, so if you anticipate your situation is getting worse, don't wait to start the modification process. If you wait until you are truly financially exhausted, you may not qualify.
If at first you don't succeed, can you try try again? Yes. In many cases, people arrive on the doorstep of a home retention expert after months of attempting to negotiate for themselves with their bank. In a way, it's good you have made the effort. Heck, you realize just getting someone to return your call is a victory. The problem is, once you have started the process, unless you can catch up on your payments right away, the letters from your bank continue to itensify along with the late fees.
Whatever happened to your banking relationship? It may surprise many people to know that while you may have had a relationship with your bank for 20 years and never missed a payment in your life, once you do, you learn the awful truth. The bank you thought regarded you as a valued customer, is NOT even the owner of your loan. They are the 'servicer' and may have sold it to Fannie, Freddie, Ginnie, Sallie or some guy in Hong Kong, and the 'investor' who actually owns your note, is not available to you. Your bank servicing department won't even admit to a home owner that such people exist --so you, the homeowner have no access to the decision maker.
Investors have many faces. They are not in the mood to negotiate with someone who is not making payments. They purposely turn over the messy stuff to their attorneys and collection agencies. These folks will be working some huge stack of paperwork under pressure to move along. That's were the professional can get results where you can't. A fellow professional who knows how to communicate on their level will make better use of their time. '
How does a negotiator get results when you can't? First of all, we are in the lending business and we know the ropes and the motivations of these folks. There's nothing secret about it. We understand they are overworked, underpaid employees of the investor. We get it they want to say yes or no and move on. Check that box. Take a lunch break. Maybe sleep at night.
We make it easier for them to say yes! Your modifier should provide a very concise case, in their language, that demonstrates what you can realistically afford. We enlist their interest in working constructively on your behalf. Our negotiator is a true professional who actually cares about helping folks who deserve a break. As professionals, we also value our reputations and we are bound to operate under very strict regulations: saving your home is a very serious business.
Who do you trust? Now please don't take my blather as advice to head on down to the spammer that sent you a 'save your home' email today. Check out your local home retention expert with the regulatory bodies in your state. In Washington state, loan modifiers must be licensed loan officers or attorneys licensed to practice in Washington. Not all states have this protection. Ask your State Attorney General, Bar Association or local bankruptcy attorney or accountant for a referral.
And hey hey hey...be careful out there! Equity Talks
© 2009 susan templeton equity talks
Saturday, July 11, 2009
Making Home Affordable RAISED to 125%!
Making Home Affordable 105% Loans were introduced just this spring and the program has simply not been meeting the public need.
Homeowners seeking to refinance their Fannie Mae or Freddie Mac Mortgages quickly found that the new 105% loans were helping a minority of people teetering on the edge of collapse. While it may seem obvious to people in trouble, here is why the limit was increased to 125% last week.
1. Many homeowners simply cannot meet the required 33% debt to income limits necessary to refinance their loans due primarily to a job loss or cutback or other change in their financial situation. You see, many people purchased or refinanced their homes with much higher housing ratios: in many cases over 45%. So unless your income went up, the chances of a lower ratio will be slim even with a fixed interest rate.
2. A careful look at the rates on the much touted 'DU Refinance' Programs our lenders are offering are just not so hot. Given you have to be in 'financial distress' to qualify; incredibly the pricing adjustments for lower credit scores and higher debt to income limits on these loans are making them pretty pricey. NOT the great low rate you were hoping for. The interest rates, after all those adjustments may be no better than that 8%- to 10% rate your note is going to adjust to anyway! And since you clearly need a lower rate to afford to keep your home...well, what's the point?
3. The third, and possibly biggest reason for MHA failures to date is due to the lower property values all across the country. Homeowners seeking to refinance their Fannie Mae or Freddie Mac Mortgage are so underwater on their mortgage to home values, 105% has been deemed pretty irrelevant. In places where property values have dropped 10% (most of the country is worse off than this now). If you originally had a 100% mortgage or combination of 80/20%, you can see you can see how 105% would be less than what you owe now unless you have paid down your principal. It's not rocket science!
Thankfully, the higher loan limit of 125% of Making Home Affordable loans should help more people stay in their homes. In most cases, if your loan is already being modified (due to financial distress) your lender will first test your case to see if they can apply the new Stimulus 125% loan program so they get to make more money. Naturally this is in their interest!
In all cases, to qualify for this program, you must
1. be in financial distress
2. demonstrate income to support the new mortgage, and
3. have a Fannie Mae or Freddie Mac Loan now. Your lender can verify that fact --just call the number on your bill and ask if you have a Fannie or a Freddie loan.
Now that this higher LTV (loan to value) is allowed, even if home value has gone down 25%, depending on how much you borrowed, you may still qualify to refinance up to 125% of the current value of your home within a new first mortgage. If you have a second mortgage now, it stays in place and must fall within that total of 125% loan to value. (Depends on Fannie or Freddie how they handle this) The second mortgage holder is being asked to 're-subordinate' their lien after the new first mortgage is recorded. These things, like modifications are taking time to accomplish. So patience is a very important aspect of working out a loan modification program, be it via this program or a straight modification.
Please bear in mind that if you borrowed more than you could afford to begin with, a higher loan amount certainly won't solve your problem. Homeowners who have lost that much of their home's equity are making some tough decisions. Unless you are really in love with your home, many homeowners are saying, hey--why get stuck with this high mortgage when we can buy a home for 30% less right now in our town? Yes, folks are still walking away from their homes in droves.
And by the way, anyone in financial distress is likely to be leaning on their credit cards, which causes your credit score to drop. The 'price adjustments' for FICO scores under 620 is 4 points. No kidding. So if you want to fund that 4 points because, being distressed, you don't have 4% lying around now do you--your new interest rate just hit the roof!
Another thing home owners don't realize: the Stimulus Refinance program is ONLY GOOD FOR FIVE YEARS. If you are offered a Refinance, the fixed terms will only be for five years and after that --either the loan will adjust again (read the fine print of your offer) or you will have a balloon note that you may have to refinance again in five years if you intend to keep your home. While the average homeowner only stays in their home five to seven years this may work fine for a lot of people.
OK, admittedly we are promoting private modification over these quasi government programs. Why? (I won't say what I think of the bank's hired guns.) The process is frustrating and time consuming but we have witnessed very solid results on behalf of our clients. The private modification seeks to fix your rate for as long as 40 years (so far). We have seen some very flexible terms offered, allowing folks to negotiate what they can actually afford to pay now, while projecting their own financial recovery down the road.
Huh. Affordable mortgages...how novel?
Happy Stimulus! Equitytalks
© 2009 susan templeton equitytalks
Homeowners seeking to refinance their Fannie Mae or Freddie Mac Mortgages quickly found that the new 105% loans were helping a minority of people teetering on the edge of collapse. While it may seem obvious to people in trouble, here is why the limit was increased to 125% last week.
1. Many homeowners simply cannot meet the required 33% debt to income limits necessary to refinance their loans due primarily to a job loss or cutback or other change in their financial situation. You see, many people purchased or refinanced their homes with much higher housing ratios: in many cases over 45%. So unless your income went up, the chances of a lower ratio will be slim even with a fixed interest rate.
2. A careful look at the rates on the much touted 'DU Refinance' Programs our lenders are offering are just not so hot. Given you have to be in 'financial distress' to qualify; incredibly the pricing adjustments for lower credit scores and higher debt to income limits on these loans are making them pretty pricey. NOT the great low rate you were hoping for. The interest rates, after all those adjustments may be no better than that 8%- to 10% rate your note is going to adjust to anyway! And since you clearly need a lower rate to afford to keep your home...well, what's the point?
3. The third, and possibly biggest reason for MHA failures to date is due to the lower property values all across the country. Homeowners seeking to refinance their Fannie Mae or Freddie Mac Mortgage are so underwater on their mortgage to home values, 105% has been deemed pretty irrelevant. In places where property values have dropped 10% (most of the country is worse off than this now). If you originally had a 100% mortgage or combination of 80/20%, you can see you can see how 105% would be less than what you owe now unless you have paid down your principal. It's not rocket science!
Thankfully, the higher loan limit of 125% of Making Home Affordable loans should help more people stay in their homes. In most cases, if your loan is already being modified (due to financial distress) your lender will first test your case to see if they can apply the new Stimulus 125% loan program so they get to make more money. Naturally this is in their interest!
In all cases, to qualify for this program, you must
1. be in financial distress
2. demonstrate income to support the new mortgage, and
3. have a Fannie Mae or Freddie Mac Loan now. Your lender can verify that fact --just call the number on your bill and ask if you have a Fannie or a Freddie loan.
Now that this higher LTV (loan to value) is allowed, even if home value has gone down 25%, depending on how much you borrowed, you may still qualify to refinance up to 125% of the current value of your home within a new first mortgage. If you have a second mortgage now, it stays in place and must fall within that total of 125% loan to value. (Depends on Fannie or Freddie how they handle this) The second mortgage holder is being asked to 're-subordinate' their lien after the new first mortgage is recorded. These things, like modifications are taking time to accomplish. So patience is a very important aspect of working out a loan modification program, be it via this program or a straight modification.
Please bear in mind that if you borrowed more than you could afford to begin with, a higher loan amount certainly won't solve your problem. Homeowners who have lost that much of their home's equity are making some tough decisions. Unless you are really in love with your home, many homeowners are saying, hey--why get stuck with this high mortgage when we can buy a home for 30% less right now in our town? Yes, folks are still walking away from their homes in droves.
And by the way, anyone in financial distress is likely to be leaning on their credit cards, which causes your credit score to drop. The 'price adjustments' for FICO scores under 620 is 4 points. No kidding. So if you want to fund that 4 points because, being distressed, you don't have 4% lying around now do you--your new interest rate just hit the roof!
Another thing home owners don't realize: the Stimulus Refinance program is ONLY GOOD FOR FIVE YEARS. If you are offered a Refinance, the fixed terms will only be for five years and after that --either the loan will adjust again (read the fine print of your offer) or you will have a balloon note that you may have to refinance again in five years if you intend to keep your home. While the average homeowner only stays in their home five to seven years this may work fine for a lot of people.
OK, admittedly we are promoting private modification over these quasi government programs. Why? (I won't say what I think of the bank's hired guns.) The process is frustrating and time consuming but we have witnessed very solid results on behalf of our clients. The private modification seeks to fix your rate for as long as 40 years (so far). We have seen some very flexible terms offered, allowing folks to negotiate what they can actually afford to pay now, while projecting their own financial recovery down the road.
Huh. Affordable mortgages...how novel?
Happy Stimulus! Equitytalks
© 2009 susan templeton equitytalks
Thursday, June 4, 2009
Do I Refi or Do I Mod?
Loan Modification and the Stimulus Refis are now the hot buzz words in mortgage land. But exactly what are they and who qualifies for help?
Mortgage loan modification as a means to help folks in financial distress has always been an option --just not widely known. The basic premise is to renegotiate the terms of your existing loan contract with your mortgage holder. Generally, modifications are considered if your financial circumstances have changed, or you simply cannot afford the new adjustable rate reset. Most lenders want a hardship letter that holds water. (Not a good idea to complain that your stated income loan was a sham!)
The key word is 'negotiation'. Few of us have the understanding of win win in a delicate balancing act with that creature we fondly refer to as 'The Bank'. Those friendly folks who loaned you money to buy or refinance just a few years ago, have built a very effective and impenetrable wall built of endless automated phone systems and people who will put you on hold to appreciate just how important they are and how insignificant you are in their view. Sad but true.
Where Do You Start? For starters, the phone number on your Mortgage Statement will direct you the accounts payable department who have access to your payment history. In many cases, if your loan was sold or being serviced by say, the contract agency assigned by a defunct bank-- good luck to you! If your loan is in some state of default your case may have been escalated to the not quite so nice folks in 'loss mitigation'.
Debt or Loss Mitigators are hired guns who may never have darkened the door of a bank...they are collection agents hired by your bank to make you pay...or as we fondly refer to them, the fear police. These are the animals who will call you at work and harass you at home after dinner and send you the most anxiety producing letters on attorney's letterheads. They will stop at nothing to get your money or else frankly, they don't get paid. Many of the debt mitigation firms are paid on commission or performance bonuses. And if your bank was kind enough to hire (maybe even train?) their own staff for the task, they are likely using contractors who have a similar goal: keep you in the highest possible loan instrument so the bank makes the most money ad infinitum.
Naturally this is not the most conducive place to be if you happen to be distressed by life's other challenges, like work, family, health or income issues. The one person you need help from to save your home is in many cases, just not that motivated so see your side of the story. It's even harder to negotiate for yourself when you are feeling less than enthusiastic and strong.
Enter: The Loan Modifier! If the level of spam in your inbox offering to "Reduce your interest rate to just 2% in just 10 Days" is any indication...there are scammers seeking to take advantage of desperate home owners. We have seen the service advertised for up to $5000 making outrageous promises. Like most things there are good modifiers and bad modifiers.
So what's a home owner in distress to do? Well first of all don't wait until you are in serious trouble. Contrary to popular opinion, you DON'T have to be behind on your payments to get the ball rolling. Start by finding someone you trust for a professional opinion of your financial circumstances. Your accountant or bookkeeper can help you work up a household budget of what is really going on. This is essentially the first step in credit counseling. It requires you look at the basic facts to explore what measures may be open to you. After all, if you have insufficient income to meet your current obligations, no amount of financing in the world will take away the pain.
Will My Loan Size Be Reduced? Imagine a bank giving money bank? 95 times out of 100, your loan amount will not be reduced unless by some miracle of having fraud or bankruptcy or a serious legal issue involving possible lawsuits or court claims against your bank. A recently proposed congressional bill to allow bankruptcy judges to adjust loan amounts was soundly defeated...no surprise there.
Expect Interest Rate Reduction = Lower Payments: The main tool of modification is to lower your interest rate for a period of years and/or extend the length of time of your new loan bring your monthly payment in line with what you can actually afford. We have seen up to 600 month terms. No kidding. Do you have any idea how much MORE you would pay for your home if you took 50 years to pay it off? The mind boggles.
If a 45 year old couple gets a 50 year loan they would literally have to live to 95 years to pay it off. Hmmmm. Chances are slim you will be saving for retirement with that endless ball and chain. Of course, if you are in your 20's and your upward career track will make the payment look easier as you get older and richer, you can opt to pay more down as you go. Naturally your bank will never suggest such a thing as early payoff of your loan. That would save you too much money. The Bank wants you paying your mortgage as LOOOONG as they can have you.
Non Profit Counseling via HUD: You can opt for a free counseling session through the Home Preservation Foundation Foundation (originally labeled 'Hope For Homeowners'). To date the BILLIONS of dollars spent setting up Hope for Homeowners has only resulted in 51 loans being negotiated, and only one of those was deemed successful or legal, i.e., 50 of these loans failed. With all that fresh money from the Stimulus Plan, the non profit counseling agencies are booming. But are the programs working? You be the judge.
As Always: Buyer Beware: Several very 'governmental' looking websites are being taken down for passing off as government sponsored and they are actually private companies!
Here's how it works: you call the hot line and a counselor is assigned to you. That person will review your entire household budget with you on the phone: including your income, debts, monthly payments, all costs, maintenance, child care, etc, and all mortgage information about your loan. Expect an hour session. Have your documents handy. The counselor records your information and explores the big picture. They will let you know which program may work for you and they send the recommendation to the lender for either a repayment plan, modification or refinance. You will be asked to fax a lot of information - an astounding pile of tax returns, pay stubs, profit and loss, statements, bank statements, medical bills, you name it --to support your case. Everything has to be updated as you go along. Keep a journal of what you send to whom and when.
After your phone session, your counselor makes a proposal to the servicing company and the servicing company sends your request on to the investor. The decision is batted back and forth and eventually returned from the investor to the servicer, who may present the counter offer to you.
Essentially, modification is an appeal to you lender, though a channel of communication to the actual end investor. According to the counselor I spoke with, "Every investor has their own rules". If you are not behind on your loan payment normally, you only get as far as customer service who tell you you must pay or else. Once you are behind on your payments you are sent to loss mitigation where they have more power to work with you. The shame of this system is how it encourages people to default on their payments in order to be taken seriously!
There may be different workouts and modifications programs with the same loan servicing company. You could have different investors within the same bank; for example, the loan may be owned by Fannie Mae, Freddie Mac, some giant Mutual Fund or a private group in Utah or China for that matter.
The Home Preservation Foundation is essentially a consumer clearing house who refers you to a counselor. I spoke with a counselor at Springboard, one of ten non profit HUD certified counselors nationwide: 1-800-449-9392. This counselor was better informed than the person I spoke with in December, so that suggests they have hired experienced staff! She told me that whoever secured the loan may be an individual or group in another country...and that party has the power to say yes or no to her proposal. She explained that because investors want insulation from the end-borrower they have a 'servicer' like Chase or Countrywide service their loans.
After your session, you may be contacted by the lender, who may or may not know anything or be helpful. That person is a paper jockey with orders from the bank to protect their interests first. Unfortunately, no one is actually negotiating on your behalf once your counselor steps aside...and you will have no idea what is going on for perhaps months. According to the Springboard counselor, the government Modification program is only good for 5 years because they expect a recovery in the economy during which time "most people in distress would eventually be able to refinance". The Stimulus Refinance version (if you qualify for that) could be good for 30- 40 years. "There is no set time frame or method". Once your proposal goes to the lender you are on your own to either accept their offer or decline it. Then the clock starts ticking again.
What if you are already on the edge? As long as you are registered with the loan servicer in a pending review or default situation, your bank would not normally proceed with foreclosure; but again there is no set standard and this varies lender to lender. We have seen banks negotiating repayment terms from one department, while the same bank was posting foreclosure notices on the home owner's door.
Private Loan Modification: Good news in our state, Washington has officially formalized the Loan Modification process, due to the dedication of Rob McKenna, our State Attorney General, in concert with our Department of Financial Institutions, the governing body of mortgage banks and brokers. After investigating the modifiers and scammers, they have come down hard on the predators making false claims for big bucks. We now have a clear set of what can be done by whom (licensed brokers, loan officers or attorneys) and for how much. $1,500 is a typical broker's fee in Washington for what can be a three month negotiation process (fee and timing depend on many factors).
Modifiers employ the DFI's household budget and standard legal disclosures informing consumers of their rights. Your deposit for the first half of the process ($750) must be held in a Trust fund or Escrow account with the balance due on successful completion. If for any reason, the terms offered are not acceptable or the request is denied, the borrower will be refunded all but $300 for administration costs before submission to the lender. No closing costs or origination fees or appraisals or hidden funny business. Once prequalified and submitted to the lender your request may or may not be accepted so there are no guarantees.
A private modifier must document every contact and keep hounding your lender. Not something your average working person has the energy or knowledge to handle on their own. In spite of your legally assigning a modifier, your lender may contact you behind their back to work a deal.This is not always in your best interest so any contact from your lender should be shared ver batim with your modifier. Likewise, if you receive paperwork from your lender don't sign anything until it has been reviewed by your modifier.
You may also choose to work with your own attorney. Some legal firms offer this service as part of their bankruptcy practice. Expect legal fees in line with their other professional services. Note: Attorneys who represent Washington residents in matters involving real property in Washington must be licensed to practice law in Washington. Check with your State Attorney General if the firm you are working with is licensed!
ARE Modifications Successful? Our anecdotal evidence suggests that private loan modifications are working because your personal negotiator is not motivated by commission or the bank's interest. Your private modifier considers your real situation and will try to find something that works for you. That person is also, in our state, a licensed loan officer who is very familiar with how banks think. Now that the banks are getting PAID to modify your loan with the Stimulus funds they are motivated to make this work and are hiring staff to help clear the backlog of applications. That's right...The bank receives up to $5,000 for successfully modifying your loan and making sure you stay on track for the five year Stimulus plan.
Making Home Affordable Refinance Vs Modification: Thankfully your mortgage professional and your bank have a new choice of Stimulus Refinance programs introduced by Fannie/Freddie called "Making Home Affordable" just now hitting the streets. You must have a have a Fannie Mae or Freddie Mac loan and your lender can verify that over the phone or look up up your home online: http://www.makinghomeaffordable.gov/loan_lookup.html
The good news with this program is if your home value has gone down, you can still refinance up to 105% of the current value of your home with the first mortgage. If you have a second mortgage now, it stays in place allowing you to go over 105%. The second mortgage holder has to be willing to 're-subordinate' their lien after the new first mortgage is recorded...which most will if they want you to keep paying them!
There is a hitch: MHA programs require the borrower to absolutely fall into what they term a safe range of debt to income (31-33% maximum). Very few people in financial distress will meet that target. Many folks borrowed originally at 45-50% debt to income ratios. Many may not qualify for these programs. Back to square one: what can you afford and who can help. (With rates going up you may not qualify for an improvement over your current loan!)
If you qualify for the Obama Stimulus Refinance, Pricing your loan has become something of a nightmare with the lenders offering this program. You see, these are 'conventional' loans after all, so the lenders are using the tighter conventional pricing guidelines. For folks with impaired credit due to hardship, you are often priced right out of the ballpark. Unfortunately, some of the advantages of this program are hard to justify, given recent rate increases. This program works best for folks whose loan is higher than their home value in areas hardest hit by property value declines.
The devil's in the details for sure! A long chat with your accountant or mortgage professional is a good start to explore your options.
And for a lighter note: Enjoy this bit about 'Hope for Homeowners' by industry insiders (and sneak a peek at Timothy Geithner's home on the block (still) while you're there! https://www.thinkbigworksmall.com/mypage/tbws/9614/1018553
Happy Stimulus! Equitytalks
© 2008 susan templeton equitytalks
Mortgage loan modification as a means to help folks in financial distress has always been an option --just not widely known. The basic premise is to renegotiate the terms of your existing loan contract with your mortgage holder. Generally, modifications are considered if your financial circumstances have changed, or you simply cannot afford the new adjustable rate reset. Most lenders want a hardship letter that holds water. (Not a good idea to complain that your stated income loan was a sham!)
The key word is 'negotiation'. Few of us have the understanding of win win in a delicate balancing act with that creature we fondly refer to as 'The Bank'. Those friendly folks who loaned you money to buy or refinance just a few years ago, have built a very effective and impenetrable wall built of endless automated phone systems and people who will put you on hold to appreciate just how important they are and how insignificant you are in their view. Sad but true.
Where Do You Start? For starters, the phone number on your Mortgage Statement will direct you the accounts payable department who have access to your payment history. In many cases, if your loan was sold or being serviced by say, the contract agency assigned by a defunct bank-- good luck to you! If your loan is in some state of default your case may have been escalated to the not quite so nice folks in 'loss mitigation'.
Debt or Loss Mitigators are hired guns who may never have darkened the door of a bank...they are collection agents hired by your bank to make you pay...or as we fondly refer to them, the fear police. These are the animals who will call you at work and harass you at home after dinner and send you the most anxiety producing letters on attorney's letterheads. They will stop at nothing to get your money or else frankly, they don't get paid. Many of the debt mitigation firms are paid on commission or performance bonuses. And if your bank was kind enough to hire (maybe even train?) their own staff for the task, they are likely using contractors who have a similar goal: keep you in the highest possible loan instrument so the bank makes the most money ad infinitum.
Naturally this is not the most conducive place to be if you happen to be distressed by life's other challenges, like work, family, health or income issues. The one person you need help from to save your home is in many cases, just not that motivated so see your side of the story. It's even harder to negotiate for yourself when you are feeling less than enthusiastic and strong.
Enter: The Loan Modifier! If the level of spam in your inbox offering to "Reduce your interest rate to just 2% in just 10 Days" is any indication...there are scammers seeking to take advantage of desperate home owners. We have seen the service advertised for up to $5000 making outrageous promises. Like most things there are good modifiers and bad modifiers.
So what's a home owner in distress to do? Well first of all don't wait until you are in serious trouble. Contrary to popular opinion, you DON'T have to be behind on your payments to get the ball rolling. Start by finding someone you trust for a professional opinion of your financial circumstances. Your accountant or bookkeeper can help you work up a household budget of what is really going on. This is essentially the first step in credit counseling. It requires you look at the basic facts to explore what measures may be open to you. After all, if you have insufficient income to meet your current obligations, no amount of financing in the world will take away the pain.
Will My Loan Size Be Reduced? Imagine a bank giving money bank? 95 times out of 100, your loan amount will not be reduced unless by some miracle of having fraud or bankruptcy or a serious legal issue involving possible lawsuits or court claims against your bank. A recently proposed congressional bill to allow bankruptcy judges to adjust loan amounts was soundly defeated...no surprise there.
Expect Interest Rate Reduction = Lower Payments: The main tool of modification is to lower your interest rate for a period of years and/or extend the length of time of your new loan bring your monthly payment in line with what you can actually afford. We have seen up to 600 month terms. No kidding. Do you have any idea how much MORE you would pay for your home if you took 50 years to pay it off? The mind boggles.
If a 45 year old couple gets a 50 year loan they would literally have to live to 95 years to pay it off. Hmmmm. Chances are slim you will be saving for retirement with that endless ball and chain. Of course, if you are in your 20's and your upward career track will make the payment look easier as you get older and richer, you can opt to pay more down as you go. Naturally your bank will never suggest such a thing as early payoff of your loan. That would save you too much money. The Bank wants you paying your mortgage as LOOOONG as they can have you.
Non Profit Counseling via HUD: You can opt for a free counseling session through the Home Preservation Foundation Foundation (originally labeled 'Hope For Homeowners'). To date the BILLIONS of dollars spent setting up Hope for Homeowners has only resulted in 51 loans being negotiated, and only one of those was deemed successful or legal, i.e., 50 of these loans failed. With all that fresh money from the Stimulus Plan, the non profit counseling agencies are booming. But are the programs working? You be the judge.
As Always: Buyer Beware: Several very 'governmental' looking websites are being taken down for passing off as government sponsored and they are actually private companies!
Here's how it works: you call the hot line and a counselor is assigned to you. That person will review your entire household budget with you on the phone: including your income, debts, monthly payments, all costs, maintenance, child care, etc, and all mortgage information about your loan. Expect an hour session. Have your documents handy. The counselor records your information and explores the big picture. They will let you know which program may work for you and they send the recommendation to the lender for either a repayment plan, modification or refinance. You will be asked to fax a lot of information - an astounding pile of tax returns, pay stubs, profit and loss, statements, bank statements, medical bills, you name it --to support your case. Everything has to be updated as you go along. Keep a journal of what you send to whom and when.
After your phone session, your counselor makes a proposal to the servicing company and the servicing company sends your request on to the investor. The decision is batted back and forth and eventually returned from the investor to the servicer, who may present the counter offer to you.
Essentially, modification is an appeal to you lender, though a channel of communication to the actual end investor. According to the counselor I spoke with, "Every investor has their own rules". If you are not behind on your loan payment normally, you only get as far as customer service who tell you you must pay or else. Once you are behind on your payments you are sent to loss mitigation where they have more power to work with you. The shame of this system is how it encourages people to default on their payments in order to be taken seriously!
There may be different workouts and modifications programs with the same loan servicing company. You could have different investors within the same bank; for example, the loan may be owned by Fannie Mae, Freddie Mac, some giant Mutual Fund or a private group in Utah or China for that matter.
The Home Preservation Foundation is essentially a consumer clearing house who refers you to a counselor. I spoke with a counselor at Springboard, one of ten non profit HUD certified counselors nationwide: 1-800-449-9392. This counselor was better informed than the person I spoke with in December, so that suggests they have hired experienced staff! She told me that whoever secured the loan may be an individual or group in another country...and that party has the power to say yes or no to her proposal. She explained that because investors want insulation from the end-borrower they have a 'servicer' like Chase or Countrywide service their loans.
After your session, you may be contacted by the lender, who may or may not know anything or be helpful. That person is a paper jockey with orders from the bank to protect their interests first. Unfortunately, no one is actually negotiating on your behalf once your counselor steps aside...and you will have no idea what is going on for perhaps months. According to the Springboard counselor, the government Modification program is only good for 5 years because they expect a recovery in the economy during which time "most people in distress would eventually be able to refinance". The Stimulus Refinance version (if you qualify for that) could be good for 30- 40 years. "There is no set time frame or method". Once your proposal goes to the lender you are on your own to either accept their offer or decline it. Then the clock starts ticking again.
What if you are already on the edge? As long as you are registered with the loan servicer in a pending review or default situation, your bank would not normally proceed with foreclosure; but again there is no set standard and this varies lender to lender. We have seen banks negotiating repayment terms from one department, while the same bank was posting foreclosure notices on the home owner's door.
Private Loan Modification: Good news in our state, Washington has officially formalized the Loan Modification process, due to the dedication of Rob McKenna, our State Attorney General, in concert with our Department of Financial Institutions, the governing body of mortgage banks and brokers. After investigating the modifiers and scammers, they have come down hard on the predators making false claims for big bucks. We now have a clear set of what can be done by whom (licensed brokers, loan officers or attorneys) and for how much. $1,500 is a typical broker's fee in Washington for what can be a three month negotiation process (fee and timing depend on many factors).
Modifiers employ the DFI's household budget and standard legal disclosures informing consumers of their rights. Your deposit for the first half of the process ($750) must be held in a Trust fund or Escrow account with the balance due on successful completion. If for any reason, the terms offered are not acceptable or the request is denied, the borrower will be refunded all but $300 for administration costs before submission to the lender. No closing costs or origination fees or appraisals or hidden funny business. Once prequalified and submitted to the lender your request may or may not be accepted so there are no guarantees.
A private modifier must document every contact and keep hounding your lender. Not something your average working person has the energy or knowledge to handle on their own. In spite of your legally assigning a modifier, your lender may contact you behind their back to work a deal.This is not always in your best interest so any contact from your lender should be shared ver batim with your modifier. Likewise, if you receive paperwork from your lender don't sign anything until it has been reviewed by your modifier.
You may also choose to work with your own attorney. Some legal firms offer this service as part of their bankruptcy practice. Expect legal fees in line with their other professional services. Note: Attorneys who represent Washington residents in matters involving real property in Washington must be licensed to practice law in Washington. Check with your State Attorney General if the firm you are working with is licensed!
ARE Modifications Successful? Our anecdotal evidence suggests that private loan modifications are working because your personal negotiator is not motivated by commission or the bank's interest. Your private modifier considers your real situation and will try to find something that works for you. That person is also, in our state, a licensed loan officer who is very familiar with how banks think. Now that the banks are getting PAID to modify your loan with the Stimulus funds they are motivated to make this work and are hiring staff to help clear the backlog of applications. That's right...The bank receives up to $5,000 for successfully modifying your loan and making sure you stay on track for the five year Stimulus plan.
Making Home Affordable Refinance Vs Modification: Thankfully your mortgage professional and your bank have a new choice of Stimulus Refinance programs introduced by Fannie/Freddie called "Making Home Affordable" just now hitting the streets. You must have a have a Fannie Mae or Freddie Mac loan and your lender can verify that over the phone or look up up your home online: http://www.makinghomeaffordable.gov/loan_lookup.html
The good news with this program is if your home value has gone down, you can still refinance up to 105% of the current value of your home with the first mortgage. If you have a second mortgage now, it stays in place allowing you to go over 105%. The second mortgage holder has to be willing to 're-subordinate' their lien after the new first mortgage is recorded...which most will if they want you to keep paying them!
There is a hitch: MHA programs require the borrower to absolutely fall into what they term a safe range of debt to income (31-33% maximum). Very few people in financial distress will meet that target. Many folks borrowed originally at 45-50% debt to income ratios. Many may not qualify for these programs. Back to square one: what can you afford and who can help. (With rates going up you may not qualify for an improvement over your current loan!)
If you qualify for the Obama Stimulus Refinance, Pricing your loan has become something of a nightmare with the lenders offering this program. You see, these are 'conventional' loans after all, so the lenders are using the tighter conventional pricing guidelines. For folks with impaired credit due to hardship, you are often priced right out of the ballpark. Unfortunately, some of the advantages of this program are hard to justify, given recent rate increases. This program works best for folks whose loan is higher than their home value in areas hardest hit by property value declines.
The devil's in the details for sure! A long chat with your accountant or mortgage professional is a good start to explore your options.
And for a lighter note: Enjoy this bit about 'Hope for Homeowners' by industry insiders (and sneak a peek at Timothy Geithner's home on the block (still) while you're there! https://www.thinkbigworksmall.com/mypage/tbws/9614/1018553
Happy Stimulus! Equitytalks
© 2008 susan templeton equitytalks
Tuesday, December 16, 2008
Loan Modification FACTS
Folks with good credit are finding it harder to get a decent Home Equity Line or Refinance terms these days. The current market is very challenging for many who had previously relied on their investments for income or cannot sell real estate in this market. Below are some options:
First Step: Explore Loan Workout: If you have an Adjustable Rate Mortgage that is adjusting, have missed mortgage payments, or may simply be financially stressed by a change of circumstances, you may negotiate new new terms with your current mortgage holder. Your lender may offer several 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! As a consumer, you have every right to negotiate with your lender for better terms. Making your case to lower your rate or extend your loan requires a very solid plan and documents to back up your ability to meet your proposed new terms. Your up to date financials are essential.
FHA Rescue and Secure Plans FHA: Officially, these plans were rolled out to offer help for people needing to get out of ARM loans or who may be in arrears. Not all lenders offer these plans. FHA manages the higher risk of default with 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 FHA prefers a minimum FICO score of 500. However, the banks who fund FHA loans have very strict loan limits (by city/county) and very few will fund under 580 FICO. Unfortunately, with guidelines tightening on all fronts, alternative credit reports are no longer acceptable in this market. Officially, the FHA Secure Plan expires December 31st, so we are not sure if any new plans will take effect in 2009. FHA loan limits are established by county so be sure your loan is allowed. Generally all government loans require lower debt to income ratios and very stiff documentation levels (paperwork).
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 help by adding missed payments to your current loan balance while adjusting the adjustable rate to a fixed rate. This may be accomplished 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.
Modification Resources: There are some specialist companies and attorneys who will help you work with your lender to modify your loan for a fee. These firms usually charge a flat fee from $1000 to $4,000 or more. Your success depends on your circumstances and you ability to build your case with your lender. Modifiers are professionals who have the inside story with lenders and are skilled negotiatiors.
In Washington State, our Dept of Financial Institutions has proposed a (pending) rule that only Licensed Loan Officers and Brokers or Attorneys can offer this service to protect consumers. You should not have to pay more than $1000 up front, and a completion fee that depends on what extra work may have been required. If they don't get an acceptable result, you should get your money back less an application fee of around $300. Please undstand that in this market, lenders are very motivated to keeping people in homes. They do NOT want your house back. Saying that, banks are less likely to help you out if they think a minimal effort will keep your business.
Private Options: Several private lenders offer refinance terms. Generally, they are very strict on minimum 580 to 600 FICO Scores in this market. Most private lenders want hefty fees up front and interest rates starting at 10-12% 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 800 449 9392 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
12/17/2008 Hope For Homeowners HUD's new program has been deemed an utter failure since it's launch earlier this year. The program is very user unfriendly so the average consumer is confused. HFH has not funded a single loan modification to date according to National Public Radio release yesterday. Weigh your options carefully and if you have questions, contact your State Attorney General or or just ask around. Lots of people have tried working with lenders themselves with mixed results.
03/04/09 UPDATE: U.S.Treasury Summary of the new program: Making Home Affordable
http://www.treas.gov/press/releases/reports/guidelines_summary.pdf
Unfortunately, the money going to banks to assist homeonwers will take time to implement. Some banks are reporting 30000 requests daily. Lenders are hamstrung with untrained staff who can actually help the consumer. Given most consumers are so stressed it seems they do need an independent representative. Unfortunately the HUD counselors give you 40 minutes and hand you over to your lender. I know people going this route now who are 3 months in arrears... and their making contact via the Hope Alliance did NOT stop the notice servers from arriving and letting the entire neighborhood know they were in default...taking pictures and being obvious about it...stapling notices on their doors like criminals.
Note: Loan Modification only applies to folks having difficulty --so if you are just trying to lower your rate and you are managing within your means, you may consider refinancing.
Success to you! Equity Talks
© 2008 susan templeton equitytalks
First Step: Explore Loan Workout: If you have an Adjustable Rate Mortgage that is adjusting, have missed mortgage payments, or may simply be financially stressed by a change of circumstances, you may negotiate new new terms with your current mortgage holder. Your lender may offer several 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! As a consumer, you have every right to negotiate with your lender for better terms. Making your case to lower your rate or extend your loan requires a very solid plan and documents to back up your ability to meet your proposed new terms. Your up to date financials are essential.
FHA Rescue and Secure Plans FHA: Officially, these plans were rolled out to offer help for people needing to get out of ARM loans or who may be in arrears. Not all lenders offer these plans. FHA manages the higher risk of default with 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 FHA prefers a minimum FICO score of 500. However, the banks who fund FHA loans have very strict loan limits (by city/county) and very few will fund under 580 FICO. Unfortunately, with guidelines tightening on all fronts, alternative credit reports are no longer acceptable in this market. Officially, the FHA Secure Plan expires December 31st, so we are not sure if any new plans will take effect in 2009. FHA loan limits are established by county so be sure your loan is allowed. Generally all government loans require lower debt to income ratios and very stiff documentation levels (paperwork).
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 help by adding missed payments to your current loan balance while adjusting the adjustable rate to a fixed rate. This may be accomplished 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.
Modification Resources: There are some specialist companies and attorneys who will help you work with your lender to modify your loan for a fee. These firms usually charge a flat fee from $1000 to $4,000 or more. Your success depends on your circumstances and you ability to build your case with your lender. Modifiers are professionals who have the inside story with lenders and are skilled negotiatiors.
In Washington State, our Dept of Financial Institutions has proposed a (pending) rule that only Licensed Loan Officers and Brokers or Attorneys can offer this service to protect consumers. You should not have to pay more than $1000 up front, and a completion fee that depends on what extra work may have been required. If they don't get an acceptable result, you should get your money back less an application fee of around $300. Please undstand that in this market, lenders are very motivated to keeping people in homes. They do NOT want your house back. Saying that, banks are less likely to help you out if they think a minimal effort will keep your business.
Private Options: Several private lenders offer refinance terms. Generally, they are very strict on minimum 580 to 600 FICO Scores in this market. Most private lenders want hefty fees up front and interest rates starting at 10-12% 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 800 449 9392 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
12/17/2008 Hope For Homeowners HUD's new program has been deemed an utter failure since it's launch earlier this year. The program is very user unfriendly so the average consumer is confused. HFH has not funded a single loan modification to date according to National Public Radio release yesterday. Weigh your options carefully and if you have questions, contact your State Attorney General or or just ask around. Lots of people have tried working with lenders themselves with mixed results.
03/04/09 UPDATE: U.S.Treasury Summary of the new program: Making Home Affordable
http://www.treas.gov/press/releases/reports/guidelines_summary.pdf
Unfortunately, the money going to banks to assist homeonwers will take time to implement. Some banks are reporting 30000 requests daily. Lenders are hamstrung with untrained staff who can actually help the consumer. Given most consumers are so stressed it seems they do need an independent representative. Unfortunately the HUD counselors give you 40 minutes and hand you over to your lender. I know people going this route now who are 3 months in arrears... and their making contact via the Hope Alliance did NOT stop the notice servers from arriving and letting the entire neighborhood know they were in default...taking pictures and being obvious about it...stapling notices on their doors like criminals.
Note: Loan Modification only applies to folks having difficulty --so if you are just trying to lower your rate and you are managing within your means, you may consider refinancing.
Success to you! Equity Talks
© 2008 susan templeton equitytalks
Friday, November 21, 2008
Staying Home?
Baby Boomers buck the trend and live longer!
Our great grandparents often lived in the same house for a generation or more. As our families spread around the globe, caring for our parents in our homes as they age is less common. Boomers, the trend setters and the greatest mass of adults in America, are setting new trends in just how they age. Not only are boomers more educated, traveling more and enjoy more lifestyle choices, they are accustomed to having it 'their way'.
Aging in Place:
If you or someone you know was shortly born after World War II, then chances are you grew up in an exciting time of change including mini skirts and long hair. Baby boomers are accustomed to taking life in stride. Rather than accepting the traditional concept of retirement homes, many seniors (55 is hardly old!) are choosing to stay at home and enjoy the lives they have built, among friends and community, in the style to which they have become accustomed.
Renovation Boom:
Many seniors choosing this path are adapting their homes to accommodate less stair climbing or more in-home help. Minor changes may solve the solve your changing lifestyle needs. Converting a seldom used upstairs into a home help suite or enlarging a bed/bath suite on the ground floor with wider doorways and ADA access is a common theme. Widening walkways, adding a sun/exercise area or creating easy care landscapes nearer the house with native plants (less mowing) may be ways to prepare for a less active lifestyle. After all your home holds so many memories of your life. Consider the idea of subdividing your property if zoning allows to cut down on the space you must manage. Easing your home life, costs and maintenance issues makes perfect sense. Younger couples are building second homes with these ideas in mind also!
Financial Comfort Zone:
If money to pay for home upgrades or ease your retirement is the issue you have even more reason to stay put than sell your home and move. If you are 62 years old, your home is paid for, or you have a modest mortgage, a Reverse Mortgage is a great way to help you maintain your present lifestyle and live more comfortably. Reverse Mortgages allow a homeowner to pay off their existing mortgage without having a payment. You can take the available equity as monthly income, an open line of credit, withdraw lump sums-- or a combination of the three. FHA insured Reverse Mortgages are only offered by certified and accredited FHA lenders and banks and are monitored by HUD so you can be sure you will be treated fairly and with respect.
Another option is a Home Equity Line used as an available emergency fund. You can keep the line 'open' and just use what you need when you need it. This option works as long as you are have sufficient income should you withdraw the total balance. The nice thing about Reverse Mortgages over Equity Lines is that you will never have a mortgage payment as long as you live in the home. At any time you can either sell the home or pay your Reverse Mortgage off, just like any other mortgage, and your remaining equity is still yours and stays with your estate.
Caring for Your Heirs:
It's not uncommon for your family to express concerns about whatever action you take --even if living in your home seems overwhelming now. Some family members will resist your selling or refinancing...in fact any change made by one's parents can seem a little unsettling. Ask a Senior Advisor to can sit down with you and discuss your options with a family member for support. After all, these are big decisions that may effect how your estate is managed and your heirs will appreciate being taken into consideration.
Our great grandparents often lived in the same house for a generation or more. As our families spread around the globe, caring for our parents in our homes as they age is less common. Boomers, the trend setters and the greatest mass of adults in America, are setting new trends in just how they age. Not only are boomers more educated, traveling more and enjoy more lifestyle choices, they are accustomed to having it 'their way'.
Aging in Place:
If you or someone you know was shortly born after World War II, then chances are you grew up in an exciting time of change including mini skirts and long hair. Baby boomers are accustomed to taking life in stride. Rather than accepting the traditional concept of retirement homes, many seniors (55 is hardly old!) are choosing to stay at home and enjoy the lives they have built, among friends and community, in the style to which they have become accustomed.
Renovation Boom:
Many seniors choosing this path are adapting their homes to accommodate less stair climbing or more in-home help. Minor changes may solve the solve your changing lifestyle needs. Converting a seldom used upstairs into a home help suite or enlarging a bed/bath suite on the ground floor with wider doorways and ADA access is a common theme. Widening walkways, adding a sun/exercise area or creating easy care landscapes nearer the house with native plants (less mowing) may be ways to prepare for a less active lifestyle. After all your home holds so many memories of your life. Consider the idea of subdividing your property if zoning allows to cut down on the space you must manage. Easing your home life, costs and maintenance issues makes perfect sense. Younger couples are building second homes with these ideas in mind also!
Financial Comfort Zone:
If money to pay for home upgrades or ease your retirement is the issue you have even more reason to stay put than sell your home and move. If you are 62 years old, your home is paid for, or you have a modest mortgage, a Reverse Mortgage is a great way to help you maintain your present lifestyle and live more comfortably. Reverse Mortgages allow a homeowner to pay off their existing mortgage without having a payment. You can take the available equity as monthly income, an open line of credit, withdraw lump sums-- or a combination of the three. FHA insured Reverse Mortgages are only offered by certified and accredited FHA lenders and banks and are monitored by HUD so you can be sure you will be treated fairly and with respect.
Another option is a Home Equity Line used as an available emergency fund. You can keep the line 'open' and just use what you need when you need it. This option works as long as you are have sufficient income should you withdraw the total balance. The nice thing about Reverse Mortgages over Equity Lines is that you will never have a mortgage payment as long as you live in the home. At any time you can either sell the home or pay your Reverse Mortgage off, just like any other mortgage, and your remaining equity is still yours and stays with your estate.
Caring for Your Heirs:
It's not uncommon for your family to express concerns about whatever action you take --even if living in your home seems overwhelming now. Some family members will resist your selling or refinancing...in fact any change made by one's parents can seem a little unsettling. Ask a Senior Advisor to can sit down with you and discuss your options with a family member for support. After all, these are big decisions that may effect how your estate is managed and your heirs will appreciate being taken into consideration.
If discussing these issues brings up resisitance, find a family member willing to get real with you about how you choose to live. It's important you find support for whatever you choose for your self. Consider your willingness to mow huge expanses of lawn and maintain an empty home as you get older just to keep your family happy. You just might be happier in a city apartment near art galleries and museums with a few potted plants!
Research Local Options:
Naturally, your ability to live a happy life in your own home is your first choice. Still, it's a good idea to check around the Senior facilities in your area and go visit friends who live in retirement homes and to see what they are like. Most senior designed villages have amenities like golf and swimming or community activities and proximity to shopping and health facilities that you might enjoy. Contact your local senior center for references.
Your local library will have information about the city and county resources. Ask a family member to take you on a tour and compare notes together of several places before you make up your mind. Having done your homework, you will have a better feel for what situation works best for you and your family.
Enjoy your retirement...you've earned it! Loannetter
© 2008 susan templeton loannetter
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