Who is elligible for a loan modification?

[Moe Bedard]

There seems to be a lot of talk but no concrete facts in regards to loan modifications. I wanted to post what a loan modification is and who is elligible for one.

A loan modification is when a lender modifies a borrowers current loan based on their ability to repay. These are used to mitigate loss and avoid foreclsoure in special situations.

Remember lenders are in the business of making money and not being nice. So when determining if you are elligible they look at several things. But the 2 most important factors are how much equity you have and your ability to repay.

If you have a lot of equity, then the lender is going to determine that it would be more beneficial to foreclose then to do a loan modification. If you have no equity then it makes sense for them to work with you and modify your loan.

It comes down to where the lender will lose the most.

[TroubleinCV]

What if you are upside down?

[Moe Bedard]

Then you would be a good candidate. As long as you meet the other qualifying factors and your loan can be modified.

[Steve1]

What if you have equity but not a ton of equity. EX: 1st and 2nd leins = 240k. Fire sale on the home today would fetch about 300k. Would 60k be enough to motivate them toward forclosure? This assuming you have the ability to pay and you're willing to pay the whole defaulted amount?

[Moe Bedard]

If you have the ability to pay, then they will work with you. $60k would motivate them to be very short with you on your repayment options and they may try and put you on a plan that may be unaffordable in the long run. So be careful.

You have the ability right? Have you spoke with them?

[evel1999]

Modification is where the lender changes your loan to something that is affordable. Most of the time it changes the rate, term and etc. If it is not affordable to the borrower it is considered predatory modification. So it should include permanent reduction in interest rate, extend terms of loan, reduce payment, deferring prior missed payments can be added to principal, and must do away with the ARM in your original loan. You should come out with a lower montly payment but my owe more if money added to principal to make up back payments.

No one knows what the effects of a Loan Modificaiton will have for all involved as this is a new idea and very few have been done. There will probably be a lot dowe in the future because demand is great brought on by these adjustable rate mortgages.

Not everyone will qualify and not all loans can be modified. You must be able to afford the new payment by showing proof of income, expenses, You must be able to show proof of income by W2 and etc. They require a hardship letter and a financial statement (income and expenses that show a positive cash flow of around $150 a month left over).

Option or pick a pay loans will be hard to get modification on.

They will require a down payment on the Loan Modification. So save all the money you can. The Loss Mitigation Dept will take your income, expenses, hardship letter, and pay vouchers and decide if you can pre-qualify for a modification. If you meet the requirements, they will talk to you about a modification and make an offer and ask for money down. Before you agree to it, make sure it is something that meets your needs. If not, you can make a counter offer. Sometimes they have to present it to the investor for his ok.

Most who get a loan modification find themselves back in forclosure within 24 months so make sure it is something you can pay.

Modification is like a refinance. Mortgage co makes an offer and borrower accepts. So it should read like a new loan and meet all requirements and be reported like a new loan. They send out the Loan Modification for your signature. Read it carefully and sign and send back.

Principal Reduction should be main goal of loan modification.

The success rate of Loan Modificaitons is only 65% Redefault in 24 months is common. Most cannot afford the payment they are in already and unless they modify the loan to give you an affordable payment it may not help in the long run. Important to work out payment you can afford.

Loan Modifications are not being monitored or enforced to guard against adverse problems for the borrower and this will create a big problem for the borrower because no telling what kind of modification they will wind up with and they will have no legal recourse.

The Mortgage Co is not concerned in really helping you their goal is to make your loan current on the books so they can report back to the investors that your loan is current. This makes them look good. It is very dangerous to seek modification without proper help or to protect yourself.

They are creating their own Loss Mitigation Dept to save money but if not careful defaults can cause cash flow problems and lead them to bankruptcy. This happened in the 90's.

If you need a Loan Modification contact the Loss Mitigation Dept of your mortgage co and request your loan be modificed. Submit hardship letter, proof of income, and income and expense statement. Get pre-qualified.
Examine the offer and see if it meets your needs. If it does, accept it. If it does not, make an offer. Ask them to present it to the investor if they say they cannot do that. Sometimes the investor will agree to your terms.

The only problem collections on your loan will continue all thru the Loan Modificaiton. They will continue to call you for payment, report you late to the credit bureau until all is settled and you are under the loan modification.

Be sure and keep good records and a copy of the Loan Modificaiton as it is not recorded and your copy is the only proof that your loan has been modified.

[workinlossmit]

OOH something i can answer...

good info from MOE (of course... ) and evel has done some research... (we need kudos)

okay..

loan modification: altering the original terms of your loan.

its that simple. nothing weird about it. but it is like an "internal refinance"

so yeah, unless you have a crapload of equity in your property, you will probably have a higher UPB (unpaid balance) after the modification is complete by a few thousand dollars.

hmmm. what else.. modification qualifyers.. (chase only) there are none!!!

up until september there were tons of layers to work through... (i.e. had to have made certain amounts of payments, had to be at certain debt to income ratio, had to be primary residence, etc etc.) well chase (in its all growing wisdom) realized that if we dont help people keep their homes then chase (and investor) are going to be owning a WHOLE HECK OF A LOT OF PROPERTY!!! and since chase is not in the real estate game they must have realized that they need to waive all the criteria to start "referring" loans for modification.

so.. yeah you need to just request it.. remember if your loan is not currently in foreclosure----to keep payin your bills.. but if its in foreclosure then you need to keep stowing that money away for the down payment...

sorry i didnt read all responses.. *sigh*
um.. say you and the lender reach an agreement.. and lets say you owe 10k.. with a good faith down paymnt of 3k--that would leave ya 7k in arrears...(what ya still owe) that remaining bal, will then be reabsorbed into the UPB (unpaid balance). then you will go under your new terms... depending on your servicer (bank) you may be introduced to step rates, temp rates or even fixed rates... chase uses the 1st and 3rd options... and countrywide and citi have been using the second option..

as for being upside down, sideways.. doesnt really matter nowadays. most lenders are continually changing their criteria because of the market trends.. and we are a copycat league.. what works for one financial institute.. may be adopted later for another institute.

[n8tvca70]

Can I just say -I've got hiiiiiiiiiiiiigh hopes....This post gives me hopes...

I am currently in Loan Mod and regardless of communication issues I currently have with Chase - does this mean being short $350 per month on budget will not be looked at? I am not short if the mortgage amount changes but am if it doesn't-Should I rewrite the expenses to reflect a small surplus (shave some off gas/electric/water) I went on the high side so I would not have a surplus thinking they would think I could do it if a surplus was there-

Ahhh the game begins.

On your mark- get set ...............................

[elpjohnson]

Hi there N8tvca70.....

I'm no expert but from what I've read it's better to have a small $200 or so of surplus income. If you have a deficit the lender may tell you that you cannot afford the payment and they may not want to work with you. There are some posts about it in the loan modification section (I think).....try reading those.

[n8tvca70]

I know this seems counterproductive but the whole thing is an oxymoron (moron being operative term) How does one have a surplus if she can't afford the adjustment? Why would someone have a surplus and need a loan mod? Can you say Defeat the Purpose....? Well I will go with it and create a surplus - I wish it was Monday right now (who says that?) because I cannot handle one more day in limbo with all this beneficial info found on this forum - I feel reloaded and ready to fight the good fight....I was on the I'm walking away running to another state and hiding under a rock phase. I'm refreshed and ready once again.

[elpjohnson]

I know....it seems so stupid that the lender wouldn't want to help you if you were in a deficit situation. BUT that is what my lender told me. When I originally submitted my financials I was something like -$87.00 and they said they couldn't help me so I revised my financials and I am now $158 surplus. Maybe you should try to contact 995-HOPE and do a counseling session with them. Who knows? Maybe they can help.

Hope this helps you.

[Andrew]

Yeah you dont want to be negative. I had about a $100 surplus on mine and was approved.

[workinlossmit]

alright kids... sorry i ve been away... holidays... stuff.. son... anyway... enough excuses..

as for your "stated expenses" or "financials" or "financial worksheet" or "household budget" what an underwriter is looking for when looking is your "VERFIEABLE" income... versus your "STATED" expenses. hence.. your "DEBT to INCOME ratio"

there is not a magical number that you want to reach.. because every account is being worked independently of others. so if your stating that your bills are causing a negative ratio (greater then your verified income) then you may want to readjust your STATED expenses to around 95-110%. personally i make sure my referrals are in between 85-120% ANYTHING GREATER THEN THAT THEN I NEED TO ENCOURAGE YOU TO FIND ANOTHER WORKOUT OPTION!!! i.e. SHORT SALE, DEED IN LIEU or FULL PAYOFF!!! (why? cus your verfied income is not going to support any kind of loan mod)

so um.. yeah...in conclusion your okay by overstating your current amt.... due to the fact that the ARM is causing you to report a negative ratio.

[dakota]

The home retention rep at CW cleaned up my financials to show that we are -$200 last week. She said that would be okay with my investor, which is the Bank of New York. She asked me this question as well...."Will you forgo paying your credit cards to make your house payment?" I said "naturally, pay the house, car, insurance, utilities....then the cards, doesn't everyone pay their house first?" She says..."you would be suprised, people will pay their Sears charge before their house note!!"

[workinlossmit]

oooooooooo.. i like that word.. Home Retention Rep... sounds so.. um.. fuzzy...

he/she is just a mitigator----

mitigation---thas tonights word assignment

[koola]

We had a loan modification previously and are back in trouble again. The IRS levied our wages and bank accounts which prevented us from paying the mortgage. This is all straightend out now, but what are the chances that our lender (Citimortgage) would give us another loan mod?

[novermyhead]

up until september there were tons of layers to work through... (i.e. had to have made certain amounts of payments, had to be at certain debt to income ratio, had to be primary residence, etc etc.) well chase (in its all growing wisdom) realized that if we dont help people keep their homes then chase (and investor) are going to be owning a WHOLE HECK OF A LOT OF PROPERTY!!! and since chase is not in the real estate game they must have realized that they need to waive all the criteria to start "referring" loans for modification.

I know that Chase has made some improvements, now why won't Homeq Servicing. They are basically telling me that the computer sorts through the accounts with certain criteria (which they will not divulge) and if our account does not fit the criteria they will not even talk to us about a loan modification.

The main reason we are not considered for a modification is because of our one late payment in August 2007 (this was an isolated incident due to medical reasons) and we brought ourselves current and put money away so that this would not happen again, but now our rate has adjusted and they are not willing to work with us. Wouldn't it make sense for them to work with us and continue to receive reasonable payments, rather than foreclose on our home and end up sitting on it for however long (homes are not selling in our neighborhood)

Does anyone have any suggestions on how to handle this situation? We have already contacted 995-Hope and our counselor has also tried to explain that we would be a good candidate for a loan modification, but according to them their hands are tied.