WHAT IS A MORTGAGE MODIFICATION? - Quick Qualification Test -> Click Here
A mortgage modification is where you or your agent negotiates with your lender to modify your existing mortgage to make the terms and payment affordable so you can stay in your home. It is NOT a refinance. There is typically no credit check, no title search, no appraisal and no closing costs. The modification process is focused on your ability to make the revised payments and comply with the modified terms for the mortgage. Many of the things that will disqualify you from doing a refinance will qualify you for doing a mortgage modification. A high Loan-to-Value in today's market will make it difficult for you to refinance. But that same high LTV will help you get a modification because it helps us establish that you have a hardship.
What we can modify almost every time?
- Currently behind on Mortgage Payments
- Currently In Foreclosure (Nod or Lis Pendens)
- Has an ARM That Has Adjusted Higher or Will Adjust Higher Within The Next Month or MAXIMUM Two Months
- Has a legitimate hardship
- Reduced income
- Pay cut at work
- Reduced hours
- New job (Less Pay)
- Loss of employment
- On disability / worker's comp
- Divorce / Separation
- Excessive medical bills
- Back taxes that are currently going paid back (ex. Owe $30.000 to IRS and are paying that back).
- Death of Household Provider
- Failed Business
* REMEMBER! To qualify for a modification, the client must demonstrate the inability to meet current financial obligations. Simply wanting a modification does not qualify a homeowner. They must show NEED.
What is difficult or impossible to modify?
- Client's sole hardship is "TO MUCH DEBT"
- Client shows a lot of assets (401K, savings accounts, stocks, bonds, retirement accounts, IRA's)
- Client shows a low debt-to-income ratio (Too much income vs. expenses).
- Multiple properties
- Fixed rate mortgages that are current (depending on the lender)
- Client does not have a true hardship
- Client's sole hardship is "MORTGAGE IS MORE THAN PROPERTY IS WORTH"
- More money being deposited into personal checking account than what they claim as income
- Has had a modification done in the past year
- Has a history of missed payments beyond current situation
- Has not had the loan for at least one year
- Negative amortization loans, We can get these modified, but if the client is looking for a lower payment, it probably won't happen. e.g. $500,000 mortgage, paying $1,300 per month at 6%. Even if we were to drop their interest to 3%, their payment would still increase over $800 per month
What Counts as a Hardship?
A hardship can be anything that has affected your ability to make your mortgage payment. Some examples of hardships include: - Your interest rate jumped upward—Payment Shock - Illness (especially ongoing illness) - Reduced Income - Failed Business - Death in the family - Divorce - Medical Bills - Loss of a scholarship
Many other factors can be considered hardships. It is critical to the success of your request for a modification that your lender understands the hardship you are facing and the impact it is having on your ability or make your mortgage payment. Having the right advocate making this argument for you can be the difference between success and failure of your modification request.
Why Would a Bank Want to Modify My Mortgage?
The biggest factor in the banks decision about modifying your mortgage will be based on the fact that it costs the bank a HUGE amount of money to foreclose on a house. This is a serious problem for banks when prices of housing are increasing. it is a CRITICAL problem for them in the current market where prices are (for the first time in history) going down month after month after month. But the cost to the bank is not just the loss they may take on your mortgage. There are other regulatory costs that force the bank to be reluctant to pursue a foreclosure if there is any other possible solution. When a property goes into foreclosure that becomes a non-performing asset. Your lender's ability to lend money is dependent on the amount of assets they have on their books. When an asset gets reclassified as a non-performing asset your lender cannot use that asset to determine how much they can lend. In fact, your lender's lending capacity is reduced by significantly more than the value of your mortgage. In many cases your lender can lend up to $9 for every $1 in assets they have on their books (because they can get additional money from the Federal Reserve and other sources for every dollar they have in their asset account). So when your mortgage becomes a non performing asset the impact on your lender is magnified many times. This should help you understand why your lender may be very anxious to be able to reclassify your mortgage as a performing assets as quickly as possible. And to add further pressure on your lender, the government is making more and more demands on lenders to help people stay in their homes. In fact at the beginning of the current crisis the government encouraged many large banks to get together and set up a program to modify mortgages and keep people in their homes. This was the politically correct thing for the banks to do and during 2008. More than 2,000,000 people were helped by this group—the "Hope Now Alliance". Unfortunately the government instructed these banks to actually help their customers instead of looking out for the banks interests first. As a result the media is now reporting that as many as 80% of the people helped by this program have re-defaulted on their mortgages within 8 to 9 months. Perhaps those people would have done much better if they had a strong advocate at their side who knew the banks would have done much more if the homeowners has pushed harder. The lenders see an immediate hit on their profit and loss statement when they do a foreclosure, but in a modification there is often little or no impact on immediate profits. This is especially true if the modification does not include a reduction in principal because that reduction must be shown as a loss on their current income statement. In addition to not having to show a current loss the lender also knows that it is very unlikely that you will remain in your home for the remainder of the mortgage. On average people move once every 7 to 10 years in the US. And when you do move the lender will be paid off in full by the purchaser of your home, at least that is their hope. The worse case is that they will have to deal with a short sale sometime in the future. On their current income statement there will be no new losses to explain to their stockholders. As you can imagine if you are not demanding the lender to reduce the balance of your mortgage...you have much more room to negotiate to get a favorable resolution of your mortgage problem, so that you can remain in your home.
What are the Typical Results?
Some of the typical results of doing a mortgage modification may be: - Reduced Mortgage Payment - Up to 3 to 12 months with out a mortgage payment - A reduction in interest rates - A reduction in principal balance (loan balance) - Converting an adjustable mortgage to a fixed mortgage - Extending the fixed rate period for a hybrid mortgage - Changing from interest only payments to paying interest and principal Any one or combination of the above can happen. It is all dependent on how your case is presented to the loss mitigation representative at your lender. Because typically you get one REAL chance to make this presentation it is extremely important that you have the most professional and best prepared presentation possible to submit to your lender. And it is also extremely important that your lender understands that you are prepared to pursue whatever avenues necessary to get them to take your proposal seriously. You need to have someone on your team who your lender is going to take seriously. Contact us now so we put you in touch with an attorney who can be your advocate as you deal with this complicated negotiation about your most important asset: your home!
What do you do now?
First speak to a professional. If you have gotten to this point in this section you already understand this is an extremely complicated process and that you need to know what you are doing to be really successful. Having the proper advocate at your side pleading your case for you is just as important in a modification as it is in any other legal matter. Do not put yourself and the future of your home into the hands of someone who is being paid to protect the interest of your lender. We are here to assist you in selecting a qualified attorney to be that advocate for you. Simply fill in the forms (click on the button at the top of this page) or fill up or contact form and one of our Specialist will call you and answer any questions you may have. Focus on the long term. A mortgage modification is for people who want to stay in their home. It is not a refinance and you cannot treat it as a cheap way to get your mortgage refinanced. If you are not seriously looking for a way to remain in your home then this process is probably not for you. A modification is not a quick fix. In some situations it can be done in a couple weeks but that is the extreme exception. More typically it will take 60 or 90 or 120 to get the process completed from start to finish. It could take even longer but that is also the extreme exception. You need to keep a positive outlook during this process and NOT get distracted by the problems of the day. Know your rights. This is a complicated process and you can easily surrender rights you may have if you don't know what you are doing. It is important that you deal with a professional who is looking out for your rights and not the rights of your lender. Tax consequences. A modification can protect you from hidden expenses of other solutions. Did you know that if you do a short sale and your lender takes a payoff of less than the balance of your mortgage this can create a tax problem for you...depending on what the state and local regulations are?
Can I get a Modification if I am an Investor?
Yes. But remember that your lender is going to look at you differently than if you are a homeowner with a problem with their primary residence. A modification can be a solution for an investor who is dealing with properties where the alternative would be to walk away and turn the properties over to the lender. But the primary reason lenders will do a modification is because it is the person's home and if they loose it they might end up homeless. THAT is the hardship that pushes the lender to focus on those cases and ignore the cases where an investor just doesn't want to loose money on his investment. If you are an investor at risk of loosing any of the homes in your portfolio you can see that you need a strong advocate even more than the individual home owner.
Can I do this Myself?
The answer is YES. But why would you want to even try? The Hope Now program discussed above was set up by the government and major lenders to do just that help people deal directly with their lenders. But that program is totally overwhelmed by a reported 47,000 calls daily from people looking for information or help. In that and other programs being set up by the government you are just another call. You need an advocate standing at your side, moving your case thru the burocratic maze to get a resolution that actually helps you and NOT only your lender.
