Looking for some advice

[auxiliary]

Hello, new member here.

My wife and I purchased our home at probably the worst point before the housing market crashed. We have a BofA loan that was handled through the Acorn program (40 year, 10 year interest only) that we really want to try and modify. I've been getting mired in all the information online and I'm not able to get a clear picture of what I should do next.

Our fixed interest rate is 6.5% and we haven't even broken past the first 10 year interest only period. I'm really hoping to refi our house to lower our rate to something around 3.5% to 4% and to move to a standard 30 year fixed, but there are some special notes about our situation. We have not had an appraisal but online estimators show the home value somewhere around $105-115k and the current tax assessed value is $125k. We currently owe $216k on our mortgage.

Over the course of the loan (6 years so far) we have paid $10k towards principal and never missed a single payment. The problem is that my wife is now disabled and no longer working, and we also had a child. It's become increasingly difficult to have any extra money once the payment comes out and uses 57% of my paycheck. Here's what I see as the sticking point...

A couple of years ago, my wife's father inherited a large some of money that he gifted to her to avoid losing medi-cal for her aging and sick mother that he was a 100% caretaker for (last year, her mother past away). This is now sitting in an account under my wife's name, but it's not our money. Do any loan modifications allow for the mortgagee to have a large bank account? I assume this answer is no, and I'm looking for advice on how we should proceed with the account. Should we remove the funds and close the account for a few months before applying for a modification? Have you ever heard of this type of situation before?

I'm just so fearful at this point because our actual bank account continues to become smaller and smaller. Just last month we had to replace our AC unit on our house and now have less than $2500 to our name. If anything happens, we're going to be in dire straights.

Any help would be very appreciated, I still hope there's some way I can modify my payment or my interest rate or both.

Thank you.

[Erik Sandstrom]

Hi Auxiliary,
Welcome to the forum, you found the right place for help.

From what you have shared with us I can eliminate certain things I think may be able to help. I'm assuming your loan is not Fannie Mae or Freddie Mac backed due to the mortgage product. They typically don't invest in those types of loans so I'm assuming its a private or public investor that backs your loan which means you're not eligible for HARP.

It sounds like you have an ideal scenario for a loan modification. You have an obvious hardship which should justify them modifying your loan. I would start by contacting your bank and applying for the HAMP program and read some of the forums here about your hardship letter and other wonderful things you will find on LoanSafe to help. The HAMP program will modify your loan to 31 percent of your GROSS monthly income. When you structure your budget, make sure it's solvent - meaning that ideally you want to show the bank you're spending just about what you're making each month.

You will also want to make sure you don't have more than 3 months of cash reserves in your bank account. So if you do submit the large account you're mentioning that will immediately disqualify you. If they find out about the bank account you won't be eligible. It may be worth it for you to take the money out and wait a couple months, I'm not sure how to advise you on that. You would think that a letter of explanation to the lender would cure that but I highly doubt they would buy the story (even though it's true).

The loan modification process is not the easiest process you will go through to be prepared to be persistent and don't lose focus on the goal. Make sure you call the bank at least once a week and get an update and ask if they need anything. Use LoanSafe for everything you need, we're all valuable resources and many of our members have already been through the process you're about to wander into.

You also may see new programs come out to help very soon, HARP 3 is rumored to be released sometime this year. After the announcement Bernanke just made it very well be coming.

[Erik Sandstrom]

Congratulations on your new baby by the way!!!!!

[auxiliary]

Would a PRA be better than HAMP? What about FHA Short Refi? I don't know if I understand the differences. Most of the explanations on makinghomeaffordable.gov seem to have very similar requirements. As far as I know my loan is just a standard BofA loan that at the time of the Acorn program had special first-time buyer incentives. I do know it's not Fannie Mae or Freddie Mac though.

Would a real estate lawyer be the best person to ask about the large account? Do they typically charge a fee (I don't have any funds to pay a lawyer at this point)

[lovesnow]

I also have a Acorn loan,June "07, was thru BOA but they sold to Nationstar in July '12. LTV is 150%, BOA kept telling not Harp Eligible because it is Acorn. My loan is a Freddie Mac, 30 yr fixed @ 5.75. Nationstar said Freddie LP says "caution" , but don't know why and they don't care, Sterling Bank in Wa State said same thing. Both tell me it isn't their overlays it is Freddie Mac. I asked both to call Freddie, we don't do that , was response. I called Freddie they won't tell me anything, lender has to do call. DTI 42%, Fico 760. Home became rental in May "11. I purchased new home on a private contract. Income has doubled since "07.No missed, no late payments. I read on Freddie website , income verification is not required anymore for Harp 2 and that to bypass income verification you have to have 12 months. Anyone else see this and am I reading correctly?
Thanks
of payments in bank.

[Erik Sandstrom]

Hi Auxiliary,
From my knowledge the PRA is a part of HAMP, the HAMP modification follows a procedure to get to a payment that's affordable (31% of your gross monthly income in many cases). How they get there is first reducing the rate, extending the term and then finally reducing the principal balance. When I was doing loan modifications the Principal Reduction Alternative came out and very few homeowners were eligible for it. It may have since changed, someone can chime in if they would like. One program I'm also not familiar with is the DOJ mod....

Regarding a FHA short refinance, that basically refinances your loan to current market value....I've never seen any of these done so I can't give you my opinion on it.

Most attorneys usually charge a fee for consultation, not sure if this would actually benefit you under your circumstances. If you're going to ask them about the large account affecting your eligibility for HAMP, they will tell you it will. Anything more than 3 months of cash reserves in your bank account at any time will (in most cases) deny your application for a loan mod.

[Erik Sandstrom]

Hi LoveSnow,
Thank you for sharing your experience so far. Whoever you're working with should have made the extra step to call Freddie Mac to at least find you an answer. On the automated underwriting findings it will give them a reason why the file is not moving forward, whether it's "Too many recent account openings, months of reserves, credit score...etc" it should still give a reason.

There are certain things the loan officer can do to try and overcome the denial, it doesnt sound like they made much of an effort to do that? Maybe more reserves would help, or reducing the term of the loan, including assets like vehicles, repairs made to the property...the list goes on and on. When I get a file that's denied for HARP - it bothers me!! I want to find out why and ALSO what it's going to take to get that file approved so at least the borrower knows what they need to do.

In any case, I would be happy to help you...feel free to reach out.

[auxiliary]

Hi Auxiliary,
From my knowledge the PRA is a part of HAMP, the HAMP modification follows a procedure to get to a payment that's affordable (31% of your gross monthly income in many cases). How they get there is first reducing the rate, extending the term and then finally reducing the principal balance. When I was doing loan modifications the Principal Reduction Alternative came out and very few homeowners were eligible for it. It may have since changed, someone can chime in if they would like. One program I'm also not familiar with is the DOJ mod....

Regarding a FHA short refinance, that basically refinances your loan to current market value....I've never seen any of these done so I can't give you my opinion on it.

Most attorneys usually charge a fee for consultation, not sure if this would actually benefit you under your circumstances. If you're going to ask them about the large account affecting your eligibility for HAMP, they will tell you it will. Anything more than 3 months of cash reserves in your bank account at any time will (in most cases) deny your application for a loan mod.

Sorry for reposting to such an old thread. I still have yet to move forward with anything due to complications in life coming up and things at work. However, I opened my mail today to find a FedEx letter from BoA with a DoJ offer. Is this something I should consider as one of the best offers I'll find? It has a short turn around to contact them (by November 28th). I was really hoping to get the principal modified since my house is now valued at 97K when I owe 216K still. Still confused.

[Erik Sandstrom]

Sorry for reposting to such an old thread. I still have yet to move forward with anything due to complications in life coming up and things at work. However, I opened my mail today to find a FedEx letter from BoA with a DoJ offer. Is this something I should consider as one of the best offers I'll find? It has a short turn around to contact them (by November 28th). I was really hoping to get the principal modified since my house is now valued at 97K when I owe 216K still. Still confused.

Hi Auxiliary,
I'm not 100% familiar with the DOJ mod and would hate to give you false advice. Does it disclose the new terms of the modification?

I would be happy to review them and see if there are any other avenues you can take that would be more beneficial than the DOJ. If you received a letter I believe that means you have been pre-selected for the program. Maybe someone else can chime in regarding the DOJ mod that has either received one or more familiar with how they work.

[auxiliary]

Hi Auxiliary,
I'm not 100% familiar with the DOJ mod and would hate to give you false advice. Does it disclose the new terms of the modification?

I would be happy to review them and see if there are any other avenues you can take that would be more beneficial than the DOJ. If you received a letter I believe that means you have been pre-selected for the program. Maybe someone else can chime in regarding the DOJ mod that has either received one or more familiar with how they work.

It doesn't really detail anything. I says "Loan Modification Example" which says Fixed, payoff date of 8/2046 with 4.25% at $1008 a month. Considering my current payment is $1337 at 6.5%, this sounds decent. I'm not really sure how to figure out all the math though. I think my current payoff is already 8/2046 because the Acorn program was a 40 year (10 year interest only).

[targetman]

We are trying to help a Florida relative with two loans with B of A. The first mortgage has $168K remaining balance. There is also a B of A HELOC with a remaining balance of $179K. Her husband died and she is struggling to make the payments. She has a negative cash flow and there is a balloon payment due in 2016 on the HELOC. She wants to keep the house and does not want to declare bankruptcy. She is employed full-time but her income has been significantly reduced.

According to my research, she is not eligible for a HAMP because of the second mortgage. She is not eligible for a HARP because her loan to value ratio on her first mortgage is not higher than 80%. She has no cash or assets to pay out in a traditional refinance. She is current on both mortgages. When the balloon payment comes due in 2016 she will have no assets with which to meet that payment. The current market value of the home is approximately $250-$260K.

I have read the posts about walking away from the 2nd but I don't know if she can do it. She tried to work with B of A shortly after her husband's death, but after 6 months they claimed that they lost all the records and she'd need to start over. She was too overwhelmed and dropped it.

What are the options? Is B of A the best place to start?

[Justbusiness]

I'm not sure why she wouldn't qualify for the HAMP. Sounds like she has a legitimate hardship going on. I'm in a very similar situation 1st and 2nd loan wise along with loan to value. They were able to get my payments to within 31 percent of my gross income on a first loan modification. My loan was also through BofA although I was behind on payments. I started with fannie mae the investor on my loan. They offered to help me to get all required documents together and then they submitted them to BofA for a modification on my behalf.

All along they told my to not worry about the second till the first was modified. I'm currently waiting to see how they handle the 2nd loan modification. Seems they can possible lower the interest rate down to 1 percent for the first five years and a steady rise from there to maybe 3 or 4 percent. Or they have the option of taking a short payoff from the government and extinguishing the debt. I also have a balloon payment coming up in about 7 years, my 2nd was a 15 year loan atomized over 30 years. So I'm curious how they will handle my second. Hopefully by the end of the year I will have an answer.

[Garry]

I'm not sure why she wouldn't qualify for the HAMP. Sounds like she has a legitimate hardship going on. I'm in a very similar situation 1st and 2nd loan wise along with loan to value. They were able to get my payments to within 31 percent of my gross income on a first loan modification. My loan was also through BofA although I was behind on payments. I started with fannie mae the investor on my loan. They offered to help me to get all required documents together and then they submitted them to BofA for a modification on my behalf.

All along they told my to not worry about the second till the first was modified. I'm currently waiting to see how they handle the 2nd loan modification. Seems they can possible lower the interest rate down to 1 percent for the first five years and a steady rise from there to maybe 3 or 4 percent. Or they have the option of taking a short payoff from the government and extinguishing the debt. I also have a balloon payment coming up in about 7 years, my 2nd was a 15 year loan atomized over 30 years. So I'm curious how they will handle my second. Hopefully by the end of the year I will have an answer.

2mp worked very well for me and I had separate banks. Once you achieve hamp the second can't foreclose without following the program, sit back and enjoy the ride.

[targetman]

Forgive the ignorant questions, I just found the forum yesterday and this is all new information for me. I thought she was ineligible for the HAMP prgram because there was a 2nd on the house. Are you saying that HAMP will modify the first loan and then you start all over again on the second? I'd like to find a way to reduce the second as soon as possible because that is the one that is dragging her down.

[Cat Damiano]

Forgive the ignorant questions, I just found the forum yesterday and this is all new information for me. I thought she was ineligible for the HAMP prgram because there was a 2nd on the house. Are you saying that HAMP will modify the first loan and then you start all over again on the second? I'd like to find a way to reduce the second as soon as possible because that is the one that is dragging her down.

Welcome to the forum and thank you for joining..........

Having a second lien would not make her ineligible for HAMP, you can read through the criteria in the following;

Home Affordable Modification Program

Home Affordable Modification Program | Bank of America

If she needs some help going through the process, there is free help available for these programs here;

Speak with a Housing Expert

[targetman]

A few phone calls later...I am told that she would be qualified and the HOPE person said they felt they could get both payments combined to around $1750/month, down from $2,200+. This sounds like a good deal in that it would give her some breathing room, but now I wonder if it could be even lower. We are having her submit forms and see what they put in writing.

[Justbusiness]

A few phone calls later...I am told that she would be qualified and the HOPE person said they felt they could get both payments combined to around $1750/month, down from $2,200+. This sounds like a good deal in that it would give her some breathing room, but now I wonder if it could be even lower. We are having her submit forms and see what they put in writing.

That is great news, I hope it all works out.

[Cat Damiano]

A few phone calls later...I am told that she would be qualified and the HOPE person said they felt they could get both payments combined to around $1750/month, down from $2,200+. This sounds like a good deal in that it would give her some breathing room, but now I wonder if it could be even lower. We are having her submit forms and see what they put in writing.

They use what is called "waterfall steps" to reduce the payment, so the payment on the first lien alone would be put down to 31 percent of her gross income. this is the maximum reduction. Once the first lien is reduced then the second lien should also be worked on the same way.


Here are the steps taken;

Step 1: Capitalization

In the first step, the servicer capitalizes accrued interest, out-of-pocket escrow advances to third parties, and any required escrow advances that will be paid to third parties by the servicer during the TPP.

Step 2: Interest Rate Reduction

In the second step, the servicer reduces the starting interest rate in increments of 0.125 percent to get as close as possible to the target monthly mortgage payment ratio. The interest rate floor is 2.0 percent. The initial interest rate would be fixed for the first five years then increase by 1 percent in year 6 and another 1 percent in year 7. For the remainder of the term the rate will be fixed at the prime market rate at the inception of the permanent loan modification.

Step 3: Term Extension

If necessary, in the third step the servicer extends the term and re-amortizes the mortgage loan by up to 480 months from the Modification Effective Date to achieve the target monthly mortgage payment ratio.

Step 4: Principal Forbearance

If necessary, the servicer will provide for principal forbearance to achieve the target monthly mortgage payment ratio. The principal forbearance amount is non-interest bearing and non-amortizing.

The amount of principal forbearance will result in a balloon payment fully due and payable upon the earliest of the borrower’s transfer of the property, payoff of the interest bearing UPB, or at maturity of the mortgage loan.

There is no requirement to forgive principal under HAMP.