Many homeowners have experienced difficulties and frustration getting through to their loan servicer when trying to obtain a loan modification. To help alleviate some of the stress associated with this task, an attorney with the National Consumer Law Center in Boston is offering the following tips:

· Consumers should keep detailed written records of every contact they have with their servicer, including logs of phone calls and copies of written correspondence.

· If the servicer makes a promise, such as crediting a payment, modifying the loan, or stopping a foreclosure sale, for example, the homeowner must get it in writing.

· When seeking a loan modification, consumers should send a request in writing asking the servicer who owns the mortgage loan. Some banks and investors have policies on which loans they will modify.

· Consumers should beware of servicers advising them to stop making payments because they have applied for a loan modification. Instead, homeowners should continue making payments for as long as possible, even if they cannot make the payment in full. Otherwise, the loan will accrue more interest, and will cost more in the long run.

· Borrowers who feel they cannot resolve their problem or those who think their servicer may be violating their rights are advised to contact a non-profit housing counselor or seek legal help. Housing counselors can help negotiate a loan modification for free.

· Consumers can visit the Treasury’s homeowners Web site www.makinghomeaffordable.gov to find out if they qualify for a loan modification under the Obama administration’s program Making Home Affordable.

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The Obama administration yesterday announced additional efforts to stem foreclosures by offering lenders and homeowners incentives to cut payments on second mortgages, write down balances on first mortgages that are underwater, and repay loans in a timely fashion. The U.S. Treasury Dept. also wants lenders and their customer-service agents to agree to modify both first and second mortgages as part of a comprehensive solution.

Details of the foreclosure prevention plan include: Decreasing second-mortgage interest rates to as low as 1 percent for five years for some borrowers; and reviving a Federal Housing Administration effort to persuade lenders to reduce loan balances enough so that borrowers again have equity in their homes.

Funding from the program will come from a previously authorized $50-billion allocation from the $700-billion Treasury Dept. rescue fund established by Congress last year. The plan would provide cash incentives to both loan officers and borrowers for successful second-mortgage modifications. A loan officer would receive $500 upfront, plus $250 annually for up to three years as long as the loan remains current. Borrowers who make payments on time will receive $250 a year for up to five years.

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Break down of President Obama’s Mortgage Relief Plan effective as of March 04, 2009:

1.  $4-5M Freddie Mac&Fannie Mae loan holders :

-Refinance at lower rates
-Borrowers with higher loan rates that may be underwater can refinance

2. Lenders work with borrowers to modify terms of sub-prime loans that are at risk of default and foreclosure:

-Establish clear guidelines for mortgage industry that will encourage lenders to modify mortgages on primary residences.
-Reduced payments must be no more than 31% of homeowner’s income

3.  Keeping mortgage rates low for millions of middle-class families looking to secure new mortgages:

-Treasury and Federal Reserve will to purchase Fannie Mae and Freddie Mac mortgage-backed securities to ensure stability and liquidity.
-Treasury will provide up to $200 billion in capital to ensuring Fannie Mae and Freddie Mac to continue to stabilize markets and hold mortgage rates down.

4. Wide range of reforms to help families stay in home:

-Judges can reduce home mortgages on primary residences to their fair market value, as long as borrowers pay their debts accordingly.
-Award $2 billion in competitive grants to communities bringing people together and testing new and innovative ways to prevent foreclosures.

Restrictions of Obama’s homeowner affordability and stability plan:

-Loans must be from on or before January 1, 2009, and can be modified through December 31, 2012 only once.
-First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750 for a conforming loan. -Borrowers must fully document income, two most recent pay stubs, most recent tax return, and sign an affidavit of financial hardship.

How it works:

-Three step relief plan for qualifying home owners:

1. Reduce the interest rate (rate floor of 2%).
2. Extend the term or amortization of the loan up to a maximum of 40 years, if necessary.
3. Forbearing principal (principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives), if necessary.

-Loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent.

-Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income; monthly payment includes principal, interest, taxes, insurance, flood insurance, HOA fees.

-Homeowners are eligible for up to $1,000 of principal reduction payments each year for up to five years who make their payments on time.

The administration also has created the new Making Home Affordable page.  In this section, the administration talks directly to consumers and offers advice to the 7-9 million homeowners who may be eligible for mortgage assistance.  The site offers great self-assessment tools to answer the question whether or not you qualify for  mortgage relief.

A  new phone number has been announced for homeowers needing urgent assistance – the Homeowner’s HOPE Hotline for urgent help at (888) 995-HOPE.  More details are available at www.financialstability.gov.

Call us toll free at 866-495-3566 to obain more information.

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Many homeowners wonder how they can lower their mortgage that reflects current market conditions.  A Short Refinance is the solution.  A Short Refinance is simply as follows, straight from the guidelines:

The Short Pay Refinance is similar to a Short Sale with one major exception; the homeowner keeps their home! It is the same processes, along with the techniques used while negotiating a Short Sale or Loan Modification. Your broker will negotiate a settlement for a reduction of the principal loan balance on the current note. Once an acceptable settlement is reached a new loan is completed for the homeowner (thus the refinance portion of Short Pay Refinance.)

Both parties benefit from a Short Refinance; the homeowner reduced the principal amount owed (generally 95-97% of the current market value) as well as lower payments; the current lien holder actually nets an average of 10% more than they would with a Foreclosure or Short Sale so it is in their best interest to work out a settlement.

If you need help with your loan, we will gladly help you out. Call us at 1-866-495-3566 to get more information. Our friendly and experienced staff are waiting.

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Waiting for the homeowner bailout provisions to come down to you from the $700 billion Emergency Economic Stabilization Act of 2008 won’t be necessary. The $300 billion Housing Economic Recovery Act of 2008 can provide more to relieve you immediately if necessary. In fact, the $300 billion recovery act mandated mortgage modifying provision and a voluntary “Hope for Homeowner” (H4H) refinancing program, so homeowners an qualify.

The $300 billion recovery act signed in July is ready to take effect. It was mandated for mortgage servicers to modify loans for certain homeowners and help avoid foreclosure under these requirements:

1. A default on the mortgage either has already happened or is “reasonably foreseeable.”
2. The home owner lives in the property as his or her primary residence.
3. The lender is likely to recover more through the loan modification or workout than by forcing the home owner into foreclosure.

The institute further advises:

1. Your hardship letter should demonstrate job loss, a serious health condition, an ensuing balloon payment, a coming adjustable rate reset or some other financial calamity that will preclude you from making your mortgage payments as scheduled.

2. Send the letter along with documented evidence — your financial statements, employment records, tax returns and bank statements and other evidence that demonstrates how you can afford a modified loan under your present financial circumstances. Also send the lender a current appraisal of your home or otherwise document the current value of your home.

3. Deal directly with a representative of the lender’s “loss mitigation” or workout department– not a broker, loan originator or other mortgage staffer.

More help for homeowners can be found here: “Foreclosure Prevention Efforts Grow.

Source: http://realtytimes.com/rtpages/20081016_bailout.htm

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