Loan Forbearance & Homeowner Protection
Save your home that you worked so hard to get through our Loan Forbearnace Program.
Lenders or servicers are not obligated to modify the terms of you loan. They generally consider some standard factors in qualifying you for Loan Modification.
A mortgage loan is a contract between you and the bank.
This contract will end or terminate itself sometime into the future. Although the terms of your loan is set and you (more or less) know your monthly obligation, these payments are not carved in stone. No one can know what happens in the future that may change the borrowers’ financial situation. One could lose his/her job; end up in divorce; lose a breadwinner to sickness or death; fall in love, marry and have a baby. Since no one can predict the future (save the Palm Readers), it will be unfair to expect that you will be able to pay the same mortgage payment for years, this why it is completely possible for the mortgage company to modify the terms of your mortgage loan.First thing you need to do is set up a personal appointment with a real estate attorney who is experienced in real estate and loan process not just those that learned this particular area of law recently.
Here are the factors that mortgage companies consider in qualifying you for a Loan Forbearance
HARDSHIP Reason why you are in default or foreseeably will be in default. Do you have a “real” hardship? Or are you one of those people that although able to afford their mortgage payment refused to pay them because you feel that it’s unfair for you to be paying a mortgage based on a high interest rate, negative amortized loan or some other sub-prime rate or loan balance higher than the market value of your property. If your hardship is based on lose of job, reduced hours of work, unexpected medical expenses, sickness, divorce, relocation, children’s education, death of a co-borrower or some type of hardship that caused you to be in default, you may qualify for loan modification.
Ability to pay a modified or forborne mortgage payment
If your hardship is temporary and/or your inability to pay is caused by a “hiccup” in your financial situation, the lender may consider this when qualifying you for loan modification. The lender will require all borrowers’ pay stubs or profit and loss statement is self–employed, bank statements, copy of last income tax return, information of all your monthly expenses including payment to other mortgage, education loan or credit card bills. The lender may look at your credit history and over-all financial picture.DO YOU LIVE IN YOUR HOMEOwner occupancy is required if you asked your lender to reduced your mortgage payment. There may be government programs that helps non-owner occupied homes but call us to find out if your lender is a participant of this program.WHEN DID YOU GET YOU LOAN?A lender will not generally qualify you for a loan modification if your loan is generated after January 1, 2009.WHAT IS YOUR DEBT-TO-INCOME (DTI) RATIO CURRENTLY AND/OR WHEN A LENDER QUALIFIES YOU FOR LOAN MODIFICATION?An attorney who happens to stumble into this are of practice without a background experience of how the loan process work needs a lot of catching up to do to assist a struggling homeowner. Front debt-to-income ratio is required by the lenders to begin the qualifying process and some requires back ratio to offer a program that will have a meaningful effect on the borrower’s modified monthly payment.LENDER’S BOTTOM LINE Remember banks are not in business of taking back properties or losing money; they’re about making money for their investors. They normally use a “Preset-Net-Value” algorithms to justify that the loan they’re about to lose monthly income from will make sense to them in the over-all scheme of their business model. Therefore, we will package your loan modification request in a way that they will see that foreclosing the loan is not to their best-interest Some ethical considerations of loan modification Although we wish that financial problems do not affect anyone, today even the hardest working person may become financially strapped. In the present economy, high unemployment and financial hardships can lead to divorce, emotional distress or unpaid mortgage payments.
If you have been in default for at least three (3) months
Your lender may start the foreclosure process by recording a “Notice of Default” of your loan. After a few months, the lender may proceed to record a “Trustee Sale” of your property. In these challenging times, the laws for mortgage modification program is a welcome relief. But some borrowers still have tough times trying to reconcile the fact that despite your contract with the lender, their dire situation may be a reason to ask the lender to redo the terms of their loan. However, lenders are quick to remind you (and us) that modification of your loan terms is NOT guaranteed.
Does your lender want to foreclose your loan?
No. Banks are the business of making money not taking back properties of borrowers who can’t afford to pay their mortgage. You may think that participating in mortgage modification is a means of taking advantage of the lender. This is not so. Lenders will rather modify your loan than foreclose it because it will cost them more money to foreclose than to modify. As such, modifying one’s loan may benefit the lender as much as the borrower.
So should the loan modification be done automatically for those who qualify?
No. For the banking industry, it is not a good business policy to arbitrarily change the terms of a pre-existing contract without legal reasons. This will not be perceived as sound lending practices, However, by following state or federal law the lender can engage in loan modification under legal guidelines that protects them and the general public. So, when you seek a loan modification from your lender, you are engaging in a legal strategy that is perceived to benefit both rather than “beat” the system.Alternatives that lenders offer to allow homeowner to keep their homePeople who needs financial assistance with their mortgage may also consider other alternative that the lender offers to lower their monthly payment.
This may be the quickest and best way to get your mortgage payment reduced. Refinancing generally change the high interest to a lower rate. A refinance may allow the lender to redo the loan to the current market value which may be less than what they owe in their loan. Banks generally require that borrower’s credit is decent and if their loan is in default but are paying their other bills, they may consider refinancing as a real alternative for the homeowner.Caution need to be taken here. Some lenders may require up-front costs or other charges to qualify an-already struggling homeowner. Make sure that your lender provides you with necessary disclosures in writing and waive all fees and charges in order to fully avail with the benefit of refinancing.
Some lender will agree to take less monthly payment and allow the deficit to be added to the loan amount in order for the payment to be affordable.
Other lender will waive late payments and other fees so that the borrower may continue paying their monthly payment without the added burden of the accumulated fees.
Re-amortizing the loan to either shorter or longer terms e.g. 15 years or 40 years.Deed-in-Lieu of ForeclosureAllowing borrowers to “mail in the key” of their property to the bank and the bank issues a Deed-In-Lieu of foreclosure in exchange for actually foreclosing the loan.
A short sale is a process of real estate sale in which the lender allows the borrower to sell the property generally for the market value where the proceeds fall short of the balance that borrower’s owe the bank. This often occurs when the borrower cannot pay the mortgage but the lender decides that selling the property at a price is better than pressing the borrower to either foreclosure or maybe abandoned the property.
In a nutshell, the bank or mortgage lender agrees to discount the loan balance because of the borrower’s financial hardship. The homeowner or debtor’s sells the property short of the loan balance and turns over the proceeds to the bank. Neither side is doing the other a favor , a short sale is simply the most economical way to solve a problem-the borrower’s inability to continue paying. Banks will incur a smaller financial loss than if it foreclosed or allow the continued nonpayment of the monthly mortgage. Borrowers are able to mitigate damage to their credit history and partially control the debt. It is typically faxter and less expensive than foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the lender’s acceptance and approval letter. Lenders often have loss mitigation departments that evaluate potential short sale transactions. Most banks have pre-determined number for such request, but may be open to offers and their willingness varies. Additional partiesIf the borrower has more than one lender multiple approvals and conditions of closing the sales varies. Junior lien holders such as 2nd Trust Deed holders, HELOC loans, HOA liens and Tax lien holders-may need to approve the short sale, it is possible that junior lien holders prevent the short sale from closing. If the loan required a mortgage insurance, the insurer will likely be one of the parties to the negotiations as they may be ask to pay a claim to offset the lender’s loss in the short sale.
Short sale is distinguished from foreclosure in that in shorts sale both the borrower and the lender consents to the sale whereas banks forced the sale in foreclosure. The borrower may decide to remain in the property, refinance the loan or force foreclosure by remaining in the property. The bank may also renege and decide to stick with the current borrower, disapprove the sale and/or foreclose the loan.Other implicationsEven a successful short sale has adverse effect on the borrower’s credit report. However, the negative impact may be less than foreclosure or if the borrower filed bankruptcy to temporarily delay the bank’s foreclosure rights. Short sales do not shoe on a credit report according to the Distressed Property Institute.While lenders sometimes forgive remaining loan balance, other lenders will not. Be sure to check the lender’s acceptance and approval letter to find out if they require contribution or seek future deficiency judgment.
Junior lien holders demanding kickbacks in the form of cash payments from the borrower or real estate agent that are not disclosed on the closing HUD-1 statement constitutes fraud.
By definition, all short sales will have deficiency balance. Laws governing the rights of the lender to pursue a borrower for the deficiency balance vary from state to state. If a lender can legally pursue the deficiency and does not specifically waive its rights to pursue the deficiency, the borrower may be liable for the deficiency. Borrowers considering short sale should be aware of this risk and ask every party involved in the process what can be done to protect against a deficiency judgment.