Homeowners caught in the complexities of reverse mortgages

Well into their senior years, Kenny and Fran Goodnow were struggling to pay their mortgage in 2007 when a salesman offered what seemed like a wonderful solution.

(Source: TampaBay.com) – A reverse mortgage would tap the equity in their St. Petersburg home to pay off their existing loan and give them extra cash for travel, a new car, a nest egg. Best of all, they could stay in their house.

The couple only had to take care of the property taxes and insurance, which totalled barely $100 a month back then.

“He told us you get paid every month instead of you paying the bank,” said Kenny, now 87.

Soon after, their insurance premium jumped so high they could not afford it. They fell behind on their bills. The reverse mortgage company demanded that they pay $217,000 or lose their home of 25 years.

The couple now wish they had better understood the seemingly simple reverse mortgage, a frequent lament of homeowners who turn to what is actually a complex financial product. And as increasing numbers of baby boomers become eligible for reverse mortgages, concern looms that many others could find themselves in the same predicament as the Goodnows.

Some will end up fighting to keep their homes.

That’s why Fran, 71, was in a Pinellas County courtroom Tuesday morning, her age-speckled hands clutching the lectern as she nervously faced a judge.

“Mrs. Goodnow, the mortgage company is filing for foreclosure,” the judge said. “Is there something you want to tell me?”

You’ve probably seen the TV ads: Actors including Henry Winkler, Robert Wagner and Fred Thompson touting reverse mortgages as “a safe, effective financial tool.”

“It allows you to eliminate monthly payments, pay some bills or simply enjoy your retirement,” Thompson, also a former U.S. senator and presidential candidate, says in his folksy drawl. “It allows seniors to stay in their homes.”

Read more from TampaBay.com

FHA HAMP Loan Modification Guidelines – Updated for 2014

If you have a mortgage with the Federal Housing Administration (FHA), and have missed payments because of a hardship or are at risk of foreclosure, there are options available to help you save your home. One of these options is called the FHA HAMP Loan Modification Program.

It is important you know that FHA had recently changed their loan workout guidelines. In this article I will list these changes so you can become educated on the current process and conditions when applying for FHA loan modification.

A loan modification is when your lender works with you in modifying your current mortgage to a more affordable payment structure. This can be done in various ways, such as lowering your current interest rate, extending the term of the loan, and/or forgiving part of your mortgage balance. (more…)

Will a loan modification hurt your credit score?

A loan modification is one way to avoid foreclosure and stay in your home. A valid concern people have about obtaining a loan modification, is how it will affect their credit score?

The facts are that a foreclosure is one of the worst possible things that could happen to one’s credit score. If you want to save your home and are worried about your credit, then you will want to seek a loan modification.

One of the first things to keep in mind when you seek out a modification, is that you may already be in a financial crisis that had forced you to miss payments. Being late on your mortgage is the number one reason your credit score would drop during the process of a loan modification. Intentionally defaulting on mortgage payments will ultimately lower you credit score by default. If you do this in order to land a loan modification, there would be nothing you could do to end the reduction in your credit score.

If you want to maintain your credit scores and still modify your loan, you will need to do your best to remain current on your mortgage.

However, getting a modification while you are current on your monthly payments is a lot easier said than done. The sad truth is that most mortgage servicers will not even entertain modifying your loan until you have become delinquent for some time. However, over the last seven years in counseling homeowners here on LoanSafe, we have seen quite a few people obtain a loan modification without ever missing a payment.

Let me please warn you that most of these people had to fight tooth and nail with their mortgage servicers in order to get help. Some of them had fought for one to two years before they got relief.

My next warning is that even if you remain current and are successful in modifying your loan, you may still take a credit hit because a “loan modification” is actually debt settlement. Negotiating a lower interest rate or reduced payment may cause your account being reported as either “settled” or “paid for less than originally agreed.” Overall, changes in your credit history, alterations to your loan balance and a shift in your mortgage terms, can at the very least affect your credit score.

Mortgage servicers use special codes to alert the three credit bureaus what customers are borrowing and whether they’re making payments on time. The code lenders are using to report this is called AC, to alert creditors that borrowers were participating in the government program which lets them know you are in distress. The AC code signals that a consumer has made only a partial payment and this could make your scores fall from 30 to 100 points. Of course, if you have missed payments, the drop in your credit score can be much more than 100 points.

Here are some recent quotes from FICO:

Depending upon what else is in your credit history, this partial payment status “can lower somebody’s FICO score by over 50 points,” said Craig Watts, spokesman for FICO.

The “partial payment” status can stay on your credit report for seven years, says John Ulzheimer, president of educational services at Credit.com. “You have to make a decision, because modifying your loan is going to hit your credit,” he said. FICO scores are the most widely used credit scores. Lenders do use a variety of other credit scores and each one may react differently to a loan modification.

Mortgage assistance programs such as the U.S. government sponsored Home Affordable Modification Program (HAMP) are supposed to allow a homeowner to get their loan payments reduced while at the same time maintaining that they have remained current.  However, many homeowners who have gone through this program have reported negative hits to their credit scores. Some of these people were able to get them fixed, but only after complaining and fighting their mortgage servicer to follow HAMP credit guidelines.

For some borrowers, anything that drives down their credit score could be an ultimately negative fate if they work for a bank, the government, are a small business owner, or for some other reason they just need to maintain proper credit.

Where do you obtain a free credit report with no strings attached?

The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies Equifax, Experian, and TransUnion to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s credit reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency enforces the FCRA with respect to credit reporting companies.

To order, visit Annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Mortgage Interest Tax Deduction Facts

The mortgage interest tax deduction (interest deduction) is a benefit that may sway anyone to become a homeowner rather than a renter. This advantage is backed by the common notion that most monthly mortgage payments are interest only. Although the interest deduction is only good if you itemize on your tax return, as the largest personal tax deduction that is available to taxpayers, mortgages are large enough to contribute some value to your overall return. According to a Forbes article, average middle-class homeowners were able to save an average of about $615 over the 2012 tax season thanks to interest deductions.

If you are currently stuck with a higher interest rate from years ago and are unable to refinance, you may be able to potentially save a lot of money by itemizing on your taxes. With a $250,000 30-year fixed rate mortgage with an interest of about 6.5%, you could be able to deduct thousand of dollars a year on your tax return from the inception of your loan. Although the interest payments decrease over time, reporting this information when it comes to tax-time will ultimately help you save more.

Mortgage interest deductions are not for all borrowers and come with a variety of rules. One such rule is that some borrowers can use the deduction on all of their interest, while others cannot. The ability to use all of your interest on your tax return depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.

If you are not sure, borrowers who meet at least one of these three qualifications can deduct all of their interest:

– Home loans that were taken out on or before October 13, 1987.

– Loans that were taken out after October 13, 1987 that were used as home acquisition debt to buy build or improve a home. These loans must have a principle of under $1,000,000 ($500,000 or less if married filing separately).

– Home equity loans or lines of credit that total $100,000 or less (($50,000 or less if married filing separately) that were taken out after October 13, 1987 to buy, build, or improve your home. These loans must also not have totaled no more than the fair market value of your home reduced by (1) and (2).

If your mortgage interest expense for the year does not fit into these 3 categories, there is going to be some limits to how you can use the deduction on your tax return. When it comes time to file your taxes, you will have to submit certain information to the IRS regarding your loan. That information can be seen at this IRS link.

Types of interest that can be deducted on your taxes

Secured debt

A loan that counts as a secured debt can be defined as one that involved the signing of a deed of trust, a land contract or simple mortgage documents. Secured debt is a homeownership contract that verifies that you will pay off the debt, confirms that if you default on the debt that your home will act as the security for the missed payments, and protects the lender and borrower with local and state laws.

Borrowers have the right to file their qualified home as a secured or non-secured home when filing on their initial taxes. This being said, no one can just flip flop if they just feel like it. Switching a qualified home back to a secure debt during tax time indeed requires the consent of the IRS. Some borrowers may benefit tax wise to declare their mortgage as not secured, if they can benefit more from declaring the interest as a business expense. Consulting a tax professional during circumstances like this one is a must.

Qualified Homes

Under tax laws, first and second homes can be declared under the interest deduction sections of tax returns. Because a large chunk of, “mortgage,” borrowers are indeed homeowners, this allows a good portion of individuals to get as much back as they can on their taxes. First and second homes can be classified through various properties such as houses, condominiums, cooperatives, mobile homes, trailer homes, and boats.

Another thing to keep in mind is that interest for mortgages that was used for additional deductible purposes such as businesses, and investments may also be used. Mortgage funds used for personal interests other than renovations cannot be used as an interest deduction.

Specific house types and limitations that can qualify for interest deductions include:

1. Main homes

Keep in mind that only one home or the house where you live your ordinary life can be used under this category at a time.

2. Second homes

Second homes can be properties owned by you but not treated as a main home otherwise known as a primary residence. Second homes do not have to be rented out to count as a tax deduction, but if you have a second home that you rent out for only part of the year, you must use the property for your own use during 14 or more days or 10% of the year to make it qualified. If you do not use it for that long during part of the year, this rental property cannot be classified as a second home. Instead you will have to file it as a residential rental property.

3. More than one second home

Only one second home can be recorded as a qualified deduction for the year. The properties’ status can be changed if:

– The property you want to use as the deduction was just purchased.
– Your main home now qualifies as a second home.
– Your existing second home was sold during the year and you wish to maintain a second home deduction.

4. Home that has divided uses

Depending on if you use part of your home as something such as a home office, you must differentiate your primary residence from the part you are using for something else. You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. This calculation may affect the amount of your home acquisition debt and your home equity debt limit.

5. Partial rental

A property can be divided between a primary residence and a rental property if:

– The tenant uses the rental section for primary living.
– The rental section is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities.
– You do not sublease by renting the same or different parts of the home to over two tenants at any time during the year.

6. Home construction

Properties enduring construction for the use of a primary residence can be considered a qualified deduction for a 2 year period.

7. Destroyed homes

If destroyed by a natural disaster such as a fire, tornado, earthquake or hurricane, interest paid on the mortgage of a main or second home can still be subject to deduction if:

– The home is rebuilt
– You sell the land on which the home is located.

Mortgages that may not be deductible

Specific liens

Liens attached to the property without consent of the borrower such as a mechanic’s lien or a judgment lien do not qualify as interest that can be written off on tax returns. This idea is backed by the fact that such debt is not secured by the home.

Wraparound mortgages

A wraparound mortgage can be defined as, “A type of loan that enables a borrower who is paying off an existing mortgage to obtain more financing from a second lender or seller. The new lender (typically a bank or the seller of the real property) assumes the payment of the existing mortgage and provides the borrower with a new, larger loan, usually at a higher interest rate.”

This specialized debt can only be considered secured if mandated under state law. The reasoning behind this has to do with the circumstances of such a loan. Such an example would be where a seller doesn’t record the new mortgage if the state law dictates that they do not have to. The inconsistency of rules is the warrant for the mortgage not counting as secured debt.

The less you borrow, the more likely you are going to be able to reap the benefits of the interest deduction. This is because borrowers with a loan over $1 million are going to have a harder time getting anything back from the IRS.

VA Deductions and Benefits

As a mortgage assistance website, we at LoanSafe pride ourselves in getting information out to various types of borrowers. VA loan borrowers are another demographic who can benefit from mortgage interest deductions. VA purchasers can claim deductions on mortgage interest, discount points and origination fees.

1. Closing benefits

Veterans and service members can take advantage of numerous advantages including the ability to write off 100% of interest paid during the tax year. Discount points and origination fees can especially be advantageous due to the fact that the 4% of the mortgage paid in closing costs can be paid off by the seller if the borrower is a decent negotiator. These free fees can be written off by the VA borrower, even if the seller makes 100% of the payments.

2. VA cash-out refinance interest deduction

Performing this type of refinance typically aids borrowers to pay off the principle on debts like credit cards and first mortgages. This not only helps to reduce the principles, but to gain the interest reduction on their tax returns as well. A significant gain from using these loans however is getting the interest payments on some credit cards that rank in 20% in interest payments lowered; As well as lower the interest payments on already low mortgage rates which run around 3.5% these days.

3. Living in a home tax free

By being married and living in the home for 2 years, a couple can sell a home for up to $500,000 and avoid the taxes. This process can be done over and over again without any repercussions. Singles can equally sell a home for up to $250,000 with an identical tax break.

A requirement for this sale type is that the property must have been a primary residence. This tax deduction is a huge financial benefit for VA loan borrowers.

For more information on tax write-offs that service members can tax advantage of, be sure to contact a tax specialist.

Some common tips to remember about interest write-offs are:

– Keeping track of the interest that you pay can be easy due to the constant statements that are available these days through the computer and traditional letters.

– Try and stay up-to-date with mortgage laws. Tax write-offs and other factors that deal with the borrowers market are currently hot topics in the political realm. Staying on top of law changes may save you financially in the long run.

– Using mortgage calculators to make these calculations can be helpful. LoanSafe for example has a variety of loan calculators including one that helps to determine the savings between a fixed or interest only loan. Our calculators can be found on our homepage.

Plenty of other situations where mortgage borrowers can and can’t use their interest as a deduction on their tax filings can be found from the IRS at this link.

I haven’t paid my second mortgage in six years

(This story was submitted today by an Arizona homeowner who hasn’t paid their second mortgage in over six years) – I am not going to say I handled this correctly in the past- but it is what it is. I live in Arizona

Had money issues in 2008. Worked out a modified loan on 1st with Chase in 2010 and got it refinanced in 2012. I currently owe about $214, 000 on the first. 2nd was a cash-out loan but its odd because on my credit reports its just listed as a “mortgage loan’- not a Heloc or anything. I have not made a payment on this since 2008- I am not sure if its Aug or Dec 07. My credit report shows I was delinquent 30 days since Dec 2007 but last payment may have been made Aug 2008.

With that said- I have received zero contact from Household for many years. Just today I received a notice my loan was being transferred as of June 15 to the dreaded Green Tree. The second has a balance of 90,000 plus.

Looking online I don’t think my house is worth much more than 190,000 or 200, 000. I know/thing I am rapidly approaching the six years statue of limitations on this or I may have already past it depending on what the date of default would be- however I also know 2nd this is not going away.

Current house value 190,000-200,000
Current 1st 214,000
defaulted 2nd 90,000 plus

With that said- any advise?

Be proactive or just wait for Green Tree – who appear to be SOB’s to reach out for me? With that said- I don’t want to lose the house- but I also don’t want to pay 90g for a house that is clearly upside down by 100,000 plus. I don’t see the home prices going crazy out here anytime soon as it appears to have leveled out for the most part. I have good income and my credit is pretty here in the decent besides this aging 2nd.

To join the LoanSafe forum, please click here or you can follow this Arizona homeowner’s second mortgage story here.

Real Estate and the Recovery: Rent or Buy? The Math Is Changing

(Source: NY Times) – Billy Gasparino and Jenna Dillon-Gasparino were savvy enough to wait out the housing boom of a decade ago as renters. Not until 2010, well into the bust, did they buy a house in the Venice neighborhood of Los Angeles, less than a mile from the beach, for $810,000.

Only four years later, the couple see new signs of excess in the housing market and have decided to go back to renting. They are close to a deal to sell their house – for $1.35 million, a cool 67 percent gain.

“It just seems like the housing market came back so strongly, so fast, that maybe there’s a little bit of a bubble there,” said Mr. Gasparino, 37, an executive with the San Diego Padres.

Their decision reflects a new reality in many of the nation’s largest metropolitan areas. An analysis by The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.

“A lot of these coastal markets look overvalued compared to rents,” said Mark Zandi, the chief economist at Moody’s Analytics. “In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”

For example, Venice, where the Gasparinos are selling their house, has benefited from an influx of tech industry, including from the opening of Google’s Los Angeles office there in 2011. “You have engineers, visual effects artists, people making 2, 3, 400 thousand dollars a year coming in,” said Tami Pardee, principal of Pardee Properties real estate brokerage in Venice. “The problem I’m having is inventory. There isn’t enough of it.”

Read more from the NY Times

Is there a new housing bubble on the way? Home inventories up 6.5%!

What goes up, must come down. It is a natural law of life and real estate is not immune to this law. The last 7 years of property turbulence is a testament to this fact.

In addition, when buying and selling a home it is not just about location, location, location.

There are many other factors that come into play when deciding to make such a huge choice or investment. One major factor would be housing inventory because this is often what takes center stage for the appreciation or depreciation in property values all across the country.

Unfortunately, right now it is not looking so hot for those of you wish to play the real life monopoly game we call buying and selling real estate.

Let’s take a look at the numbers.

There is currently a 5.9-month supply of homes on the market right now. This is the highest level since August 2012.

Housing inventory 5_22_

Housing inventories are up 6.5% from last year to a 19-month high in April.

Housing inventory 5_22_2014

The more homes on the market, the harder it is to sell and the less homes appreciate. This is what is starting to happen right now. The beginning of another possible property recession and housing bubble.

According to the National Association of Realtors and Lawrence Yun, NAR chief economist, expected the improvement. “Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point,” he said. “Annual home sales, however, due to a sluggish first quarter, will likely be lower than last year.”

NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said there was some heating of the market last month. “The typical time on market shrunk in April, with four out of 10 homes selling in less than a month,” he said.  “Homes that show well and are properly priced tend to sell the fastest. More housing inventory gives buyers better choices, and takes the pressure off of the buying process, which is a welcome sign, especially for first-time buyers.”

How I settled my 2nd mortgage with Specialized Loan Servicing (SLS)

(This true life mortgage success story was submitted by a homeowner in the LoanSafe forum. These stories are not solicited in any way, but freely given by people who wish to pay it forward by educating other homeowners about the strategies they used to  save their homes from foreclosure. – Moe)

I want to thank everyone responsible for this great website and Tom in particular for his strategy on settling seconds. We received our record copy of the Deed of Full Reconveyance on our 2nd mortgage on the May 16th, 2014. Two years and three months since we made the last payment on 2nd mortgage.

The complete history:

Purchased in 2007 for $485,000 in California using a $388,000 First and a $72,750 HELOC with 5% down. HELOC was completely maxed out as part of the purchase. Both loans were through American Home Mortgage (AHM). Before AHM collapsed in 2007 the 1st was sold to some investment pool and servicing was sold to Wells Fargo. The HELOC ended up with Bear Stearns (as EMC), which then became part of Chase I believe when Bear went under, it was eventually bought by a community bank in Georgia who had SLS do the servicing. At the worst of the downturn similar condos in our complex went for $375,000. The HELOC was interest only for the first 5 years with a renewable interest only draw period for another 5 years.

In December of 2011 SLS notified us that the owner of the HELOC note was not going to renew the draw period and the loan would recast, requiring interest and principal payments. I sent a letter asking them to reconsider that decision as I was willing to continue to pay the interest on the loan but I did not want to repay any principal on the 2nd while the 1st was still underwater. We wrongly figured that by the time the 1st recast in 2017 that we would still be underwater. They denied the request so when the first payment of principal was due, we stopped making payments on the 2nd.

Originally this was never an issue of if we could ‘afford’ the higher payment, it was a combination of thinking we would end up doing a strategic default on the 1st, so why bother paying on the 2nd, and having felt like we had been deceived by the mortgage broker who led us to believe that we would only need to pay interest until 2017.

After two years of refusing to send SLS any financial information but letting them know I would be interested in settling, they finally sent us an offer to settle at 40 percent without any financial information. From reading here it was apparent that this was their new default offer and it was extremely rare to find anyone settling with SLS without providing financial information.

In 2012 and 2013, the real estate market in San Francisco (where our condo is) went crazy. Similar units in our complex were now selling for $495,000. So while we were not afraid of SLS foreclosing right now, we did feel that we were now in a position where if we settled with them, we would be in the money and even if something goes wrong with the 1st mortgage we could sell and would recoup any money we paid to settle the 2nd. So rather than continue to hold in the hopes of SLS making a better offer with no financials we accepted the 40 percent offer since we had the money in savings to cover it.

So now we have just have the 1st mortgage which is currently i/o at 2.875% (changes annually to the 1-year LIBOR + 2.25).

Thank you to everyone here for your advice but more importantly your moral support.

If you would like help with your mortgage or to read more stories such as this, please feel free to join our mortgage forum right here.

How to compete against cash investors in the real estate market

(By Erik Sandstrom with New American Funding) – As we have started to see increases in home values in certain areas across the United States, I’ve noticed that it’s been more difficult for a borrower with financing to obtain an accepted offer vs a cash investor. Cash Investors have -been dominating the marketplace and in some circumstances even offer significantly higher than the asking price altering the market in certain areas. A report from Goldman Sachs estimates that the number and dollar volume of homes purchased with all cash has risen to more than 50% nationwide.

This thread is to help New Homebuyers educate themselves with the obstacles of competing with a cash investor and how to overcome them. This requires a team effort where all parties involved (You & your family, Realtor & Loan Officer) are skilled and know what to look out for.

Some of the most common areas this is starting to occur is Florida, South Carolina & Georgia. We have already seen a large increase in value here in California but from my experience we tend to start the nationwide trend.

First and foremost would be to get Pre-Approved for a new home loan and save as much as you can for a down payment. The more you put down and the program that you’re qualified for can make a difference, especially if you’re willing to offer more than the asking price. Sometimes the Pre-Approval will be as good as cash and the seller may ask for verification of funds needed to close the transaction. It’s best to speak with a qualified loan officer that understands all programs, guidelines and which one would best suit you and your family. The Pre-Approval typically will show the details of your new home loan, your credit score and assets.

In addition to the Pre-Approval it’s smart to write a cover letter explaining your intention with the property. Remember these Sellers do have emotions, just like you. Sometimes the seller is selling the home that they grew up in or have lived there a long time. They would rather sell the home to a family that is planning on living there vs an investor who is buying it for cash and renting it out or flipping it.

Most loan officers like myself will make themselves available if a seller wants to speak with them in regards to the borrowers qualifications and what they have done so far to ensure the borrower is eligible. Anything to make yourself stand out from the crowd can make a difference in obtaining an accepted offer or not.

Who am I?

My name is Erik Sandstrom with New American Funding. If you need help obtaining a mortgage or just have questions about the current market, please feel free to give me a call at 1-800-779-4547. To discuss this article, please visit the LoanSafe forum via this link here.

‘I’m too afraid to sell my home’

(Source: CNN) – In hot real estate markets all over the country, homeowners are feeling stuck: They know they can get top dollar if they sell their home, but fear they will have no place to go if they leave.

The concern: An ongoing shortage of available homes for sale in cities like San Francisco, Los Angeles, Boston, New York and Washington, D.C., has made it extremely difficult for buyers to find homes they want to move into — or can afford.

“One of the things we hear all the time is, ‘I’m afraid to sell my house because I can’t find another one,” said Glenn Kelman, CEO of real estate brokerage firm Redfin.

And the competition for the homes that are available is so intense that buyers need to bring plenty of cash to the table. In fact, all-cash deals hit a record 43% of home sales in the first quarter of this year, according to RealtyTrac.

Tim Trampedach, a 36-year-old business owner who lives in San Francisco, has seen his home’s value soar from $1.2 million to $1.6 million in the past three years. He and his wife want to move into a bigger place, but there are simply no homes within their price range in their Portrero Hill neighborhood.

“My wife and I are effectively locked into the house,” he said. “We can’t sell because we can’t afford anything else nearby.”

San Francisco is one of the most extreme examples. The number of homes for sale fell by more than 8% year-over-year in March, while listing prices soared 11.5% to a median of $867,000.

When inventory shrinks and prices move higher, it makes it even more difficult for a buyer to upgrade to a larger home. And if they can’t buy, they can’t sell, reducing the number of lower priced, starter homes.

“It’s people like us, who live in a fully turnkey home, who can’t supply homes because we have nowhere else to go in the city,” said Trampedach.

Read more from CNN

How a divided government will affect housing and the economy

While the National Association of Realtors (NAR) this past week analyzed why the housing market might be protected from a potential political gridlock in upcoming months, the housing market was one of the key issues in a report that elaborated on key issues that Congress may not be able to fully reform anytime soon.

The message that Congress may not be able to compromise on the housing market was discussed in the report that NAR received from news anchor and political commentator Chris Matthews. Mathews spoke at last week’s Insights and Perspectives with Chris Matthews session at the Realtor® Party Convention & Trade Expo.

As the talk show host of MSNBC’s Hardball with Chris Matthews, Matthews offered his opinion to NAR that Congress is far too partisan to agree on anything. The partisan-like views currently existing will certainly influence the outcome of the 2016 presidential race, but right now we need two sides to agree on what is best for the housing market.

A simple Google search can define a partisan as, “prejudiced in favor of a particular cause.” We certainly see this today where one side is in favor of some government control of the housing market to keep it stabilized, while the other side is for a strictly privatized market.

Matthews take on partisanship is that it is going to continue for quite some time, well beyond the 2016 election. Matthews backing for this hypothesis is due to the idea that we live in a strictly two party system that is not afraid of being defeated by a moderate candidate. Because of this, “They run their campaign under the promise of being well-engrained within their party,” said Matthews.

The talk show host however agrees with the premise that effective politics needs compromise. According to his views, respect and the ability to settle differences of common goals is a factor that is going to positively settle key issues such as the housing recovery. Despite his own beliefs, he also concurs that partisanship is the way of the future. With something as sensitive as the entire mortgage market that involves a nationwide structure of both residential and commercial real estate, it is apparent that division in the issue could create a political gridlock.

With 2 years left until the next major election, it will be very interesting to watch what happens as Matthew states. Although from LoanSafe’s perspective, it is not necessarily fun to watch the housing market crumble. Recent news has shown that areas in the market are actually recovering rather than crumbling.

Earlier this month, 33 national organizations and 163 state and local organizations sent a letter to 6 senators who are on the Senate Banking Committee to get cracking on better organizing Housing Finance Reform and the Taxpayer Protection Act of 2014. This reform calls for the expansion of the National Housing Trust Fund, the nation’s only standing federal fund to build affordable multifamily housing.

Several Pilot Programs such as Blue Print for Access, and an expansion of a green multifamily energy saving program through Fannie Mae and HUD seek to improve housing conditions for everyone. Many housing advocates like FHFA Director Mel Watt are promoting the expansion of mortgage credit so middle class borrowers can continue to buy homes. At the same time, it is recognized that certain rules such as those that limit buyers to only the ones who can qualify to pay back should exist.

While there are opportunities and reforms like these being created on the top levels, there are organizations and individuals on the opposite side trying to extend a continuation of business practices that were known to have been contributed to the starting of the housing crisis.

We at LoanSafe recently analyzed the other report that NAR released earlier this week regarding housing reform and politics. In that piece David Plouffe, a former adviser for the Obama Administration stressed that he predicts that there will be no majorities in the U.S. Senate or House for the next six years. He claims that this imbalance might create a tipping point where they all, “come to the middle and cooperate because that’s what the electorate wants.”

Based on Matthews interpretation, what is currently happening with partisan parties is creating even more division than majority parties.

How I settled my $70,000 second mortgage with Citi for only $8,000

This information was submitted by a LoanSafe forum member who recently settled their $78,000 second mortgage for $8,000 with Citi. You can view more success stories from homeowners who have also settled their 2nd mortgage for pennies on the dollar in our forum.

I have really enjoyed reading these forums and would like to thank all of those who have contributed. I was very fortunate to have recently settled my second mortgage and would like to share the details.

First mortgage balance is 217,000 (was BofA, now OCWEN and non-Freddie/Fannie) ARM currently at 3.250 (~1200/mo)
Second mortgage was Citi at 78,000 Fixed at 8% (~700/mo) and the value of the home is around 200,000

I was frustrated that HARP was unavailable and HARP 3.0 wasn’t happening. I had read the advice on strategy for settling seconds and seriously considered it. I was very apprehensive about beginning the process by stopping the payments on the second due to concern that it will affect my employment down the road. I have never been late on a payment and my FICO was 750.

I read a few (very few) posts where people who were current were successful in settling their second and I decided to give it a shot. I did have a medical issue in the last year that caused a significant reduction in my income.

I started the process in October by submitting an online form on the Citi website (Homeowner Support). I provided all that they asked for including all financials and a hardship letter explaining why I needed assistance. By March I was speaking to a person at Citi who told me I was not approved for a modification and they asked me if I was interested in a short sale, which I was not. Somewhat surprisingly, the person I was speaking to told me I could make an offer to settle the debt. This is what I wanted to do but I felt like if I brought it up in the beginning I wouldn’t be considered.

At any rate, I asked the person what the offer entailed and they told me that I would make a written offer of around ten percent and they would consider it. I submitted an offer of 7,500. A couple of weeks later I was contacted again and told that my offer wasn’t approved, but that they were authorized to accept 8,000. I was thrilled. I fully expected their counter offer to be in the 70,000 range. I received their written offer and instructions and wired the funds to Citi.

The next day I accessed my account online and printed the payment history for my records. A few hours later I logged in again and received a message stating the account was no longer accessible online. The next day I called the 1-800 number and spoke to a customer service rep that told me the account showed the credit of 8,000 and now shows a zero balance. Oddly, she said the account indicated I was in foreclosure!

About two weeks later I checked my FICO score and it had dipped to 670. The Citi account showed the derogatory entry “settled for less than amount owed” and had a zero balance. It also correctly showed zero lates.

I am expecting to receive some kind of notice from the city telling me the lien was removed. If I don’t hear anything in the next week or so I’ll go in and check. From other posts it appears this can take some time. I have not received a 1099 but I am expecting to receive one. As I understand it, unless congress passes the law to extend the debt forgiveness law that expired last December, I will have to pay tax on the forgiven amount.

Overall this was a pretty painless process. The removal of the second has made a huge difference and I would not have gone down this path if it were not for the contributors on this forum. Thank you.

Sample Loan Modification Hardship Letter

Sample Loan Modification Hardship Letter

A loan modification is a great way to get your budget back on track when you are having problems managing your monthly mortgage payments. When you apply for a loan modification with your mortgage servicer, they will request what is called a hardship letter. This is the letter where you will explain the details of your financial situation, and the reasons why you can no longer afford your mortgage payments.

Having a well written hardship letter is one of the most important steps in getting your loan modification approved. In this article we will explain how to write one and also give you a couple examples that you can use as a template for your own letter.

The first thing you will want to do when preparing the letter is to compose a chronological list of all of the factors that have caused you to fall behind (or may) on your mortgage payments. Eligible hardships include a job loss, income reduction, illness, relocation, divorce, medical bills, death of a spouse, etc. In your letter you will also want to make a note of when each event occurred and include any documentation that you can.

Next you will then need to detail the steps you are taking to correct your situation. For example, if you recently lost your job, you will want to show that you have a new job or how you are actively searching for employment. You will want to provide as much documentation as possible to support your claims in order to prove your hardships.

In the last part of your letter you will want to make a request for a loan modification and briefly explain how approving you for a modification is really a win-win proposition for both parties involved. You may also want to propose an interest rate and payment that will be affordable to you based on your current financial situation.

Please keep in mind that your mortgage servicer is probably very busy and they have many people like you who need help. Therefor, you will want to try to keep the length of your letter to about one to two pages at most.

Here are two example letters written by real homeowners and members of  the LoanSafe  forum who had received a loan modification from their efforts.

Name: (Your Name)

Address: (Your Address)

Lender Name: (Your Lender)

Loan #: (your Loan #)

To Whom It May Concern:

We are writing this letter to explain the extreme financial hardship it will be for our family when our loan adjusts from a 7.75% interest rate to a 10.75% interest rate in August 2008. This interest rate adjustment will cause our payment to dramatically increase in the amount of $1695 per month on top of our current payment of $4234.10 increasing the payment to $5929.10 per month. Our current income does not support an increase of this magnitude. As a matter of fact, a monthly increase of this amount will ruin us financially and within a few short months of this adjustment we will surely fall into foreclosure as we will not be able to afford the monthly payment.

We conducted a counseling session with a woman named Deborah Winston (888-669-2227 x742) from 995-HOPE and submitted a monthly budget where we only have a surplus of $158 per month after we pay all of our monthly obligations. According to the counselor we are currently utilizing 54% of our monthly income for housing costs which is way above the national average.

My husband, Kevin is the bread winner in the family and his income varies from paycheck to paycheck because of overtime, holiday pay (2 times per year) and uniform allowance. So, sometimes he makes his base pay of approximately $7839 per month and other times he makes more than that depending on the overtime he works each month. However, overtime is never guaranteed so we cannot depend on the overtime in order to fulfill our monthly obligations.

I am currently receiving Social Security Disability in the amount of $1435 and am also the payee for our son, Christian in the amount of $717 per month. Also, I receive a check from Calpers for my disability retirement in the amount of $829.74.

We would appreciate the opportunity to work out a loan modification where our interest rate will be frozen at the 7.75% interest rate for the DURATION of the loan, if the rate is just frozen for 2 to 5 years we will find ourselves in the same situation in a few short years from now.

Please take the time to review the information we submitted and consider our request. It is very important to us that we keep our account in good standing and preserve our credit rating as well as protect our main asset….our home.

Thank you in advance for your time and consideration in this matter. We are looking forward to working with Option One to resolve this situation. If you have any questions please contact us at xxx-xxx-xxxx.

Sincerely and Respectfully,

Borrower’s Signature
Co-Borrower’s Signature


Sample Hardship Letter #2

Name: (Your Name)

Address: (Your Address)

Lender Name: (Your Lender)

Loan #: (your Loan #)

To Whom It May Concern: 

I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to do that.

There are several reasons that caused us to fall behind on our payments:

a) On July 6, 2007 my husband, was laid off from his job with IBM. He no longer receives Unemployment Compensation from the State of Florida as of January 2008.

b) Since July 2007, we went down to one income and were unable to keep up with the higher mortgage payments due to our escrow account from the beginning of 2007 being short on funds due to raised taxes and insurance coverage in Flagler County, FL.

c) In November 2007 we had to fly out of State for a family emergency which did not enable us to make that months payment. 

d) Since we no longer have medical coverage, I had to pay for my visits to the doctor on several occasions due to prolonged and excessive menstruation. The Doctor Office would not see me, unless I had full payment at each visit.

e) Since there is only one income in our household, but my husband helps me with my business while still looking for a comparable job, I must travel a lot. Gas prices have become extremely high, if I do not travel to do presentations and meet with clients I cannot assure growth.

It feels like catch up for those two months we fell behind on is almost impossible, I assure you we have every desire of retaining our home and repaying what is owed to Bank of America. But at this time we have exhausted all of our income and resources so we are turning to you for help.

Our situation is getting better because like I stated above, my husband and I have combined forces and we are working my business together in order to ensure stability and growth in our income and we feel that a loan modification would benefit us both. We would appreciate if you can work with us to lower our delinquent amount owed and/or our mortgage payment so we can keep our home and also afford to make amends with Bank of America. 

We truly are looking forward to you working with us and we are anxious to get this settled so we all can move on.

Sincerely and Respectfully, 


You can find more examples of various hardship letters right here written by different homeowners in the LoanSafe forum. If you are currently pursuing a loan modification or any other type of loan workout, we strongly encourage you to join our free forum here on LoanSafe.org. We are a community of over 33,000 homeowners and mortgage professionals alike. You will find all the information you could possibly need to assist you through this exhausting and very confusing loan workout process.

Loan Officer Survival Tips for 2014

The mortgage lending business has changed dramatically over the last 7 years. It started with the mortgage meltdown of 2007, and it has been a rocky loan ride ever since. In fact, the mortgage business has simply never been the same.

A lot of things that affect the mortgage market have been reeking havoc on the ability for loan officers to acquire business. Mortgage applications are at the lowest levels in 14 years. Foreclosures are way down, and many homeowners are not selling because they are either underwater, at the break even point, or it just simply doesn’t make sense to sell their homes in this economy because they would have no place to buy if they did sell. The lack of equity, foreclosures, and homes for sale equates to low mortgage activity.

In order to survive today, you have to adapt to market changes and the ways you do business. You will have to work twice as hard for a fraction of the business and money you may have been making before. This is the cold hard reality of being a loan officer in the current market.

There are no short cuts or magical lead systems that will help you become a top producing loan officer. In order to succeed in 2014 and beyond, you will need to develop a marketing strategy that will help you stand out in this tough economy. This is easier said than done, due to the fact that there seems to be no rhyme or reason why the market is so topsy-turvy.

Let’s face the facts. There is only so much business to go around at the moment. This creates a massive problem because many loan officers are going after the same business as their competitors. That is why you may want to start thinking about becoming an expert in a specific niche.

Niche Loan Products and Marketing

If you want to become a top producing loan officer, it is all about leads. Without leads to pursue and clients to add to your business, you won’t make any headway. You need to go to where the customers are, and explain to them quickly and accurately why they should use your services. There are a lot of loan officers out there – why should they choose you?

That question isn’t all that easy to answer, so you might need to think long and hard about what it is that makes you different from the rest. If you are offering all the same loan products as the big banks and lenders, then you are setting yourself up for failure.

In this type of market if you are not on the a big bank’s mortgage team, it is probably best that you focus on niche loan products that can help you stand out from your competitors.

So, what are some hot niche mortgage products you can offer as a loan officer?

Examples of some great mortgage niche products in this current market would be purchase money loans, VA loans, FHA loans, reverse mortgages, manufactured home loans, and after foreclosure or short sale mortgage programs. In each of these niches, there are many loan officers who are targeting one or more of these loan programs by focusing their marketing to reach borrowers in their chosen niche. A lot of them are doing very well because of this choice.

I have always been big on niche marketing. Before I started this niche website LoanSafe to help people with their mortgage problems, I had operated another site back in 2005-2007 that was focused on manufactured home loans. This was back when the mortgage market was actually thriving. I clearly remember loan officers literally throwing these leads in the trash or laughing at these borrowers. No one wanted to help them in order to make loans to these people because the loan amounts were so low and commissions too small. They would rather make $10,000-$20,000 on one loan, which many of them did, but I still chose to focus my niche on manufactured home loans because there were very few loan officers who had specialized in these types of properties. This ended up being a good choice and I made a heck of a lot of money with very little competition.

Another example of thriving with a niche mortgage program would be my loan officer friend and colleague, Jon Maddux. He is the co-founder of AfterForeclosure.com. A company that specializes in helping borrowers obtain a mortgage after foreclosure or short sale. He is thriving right now, while almost every other loan officer I know is fighting over loan scraps or simply getting out of business. Jon had also started another successful niche mortgage distress company back in 2008 called YouWalkAway.com. Hence, his decisions to focus on mortgage niches have paid off well for him.

In this market, you have to be smart like Jon Maddux and think outside the normal mortgage box if you want to become a top producing loan officer. In addition to these facts, you also need to communicate effectively, offer awesome client services, and be the go to professional for mortgages.

Here are some more tips to help you stand out from the crowd –

Be the mortgage market expert – Are you a loan officer who has their hand on the pulse of the market and understands all the subtle changes in rates, etc.? Position yourself in the market as someone who is a local lending expert and who will have the answers to all questions your clients may have.

Always effectively communicate – If you feel like you are especially good at communicating with your clients, highlight that in your marketing efforts. Many buyers like to be talked through the whole process, so they will value finding a lender who is willing to work closely with them and who won’t disappear for weeks at a time.

One of the most common mistakes when marketing is not telling the customer directly what you have to benefit them. All they care about is buying a house in the most cost-effective and efficient manner possible. If you can highlight how your experience and knowledge as a loan officer will help them reach that goal, you will be a big step closer to gaining a client. It is a safe bet, that the top producing loan officers in any area are the ones who focus first on the needs of their clients.

Be a proven winner – For loan officers who have been in business for a long time in one area, leveraging your past successes is a great idea. Highlight your lending accomplishments and talk about your track record within the community. Most people trust someone who has been there, done that – so use experience to your marketing advantage.

While you might think it is a long road to the top of the lending game, it doesn’t have to be. With hard work and a smart approach to your marketing efforts, growth in the business may be closer than you think.

Ohio First Time Home Buyer Program

The Ohio Housing Finance Agency (OHFA) is encouraging first time home buyers in Ohio to take advantage of the Agency’s First-Time Homebuyer Program. OHFA Executive Director Doug Garver even released a statement where he expressed the importance of taking advantage of programs such as this one. “It’s our mission to design affordable home loan products that promote sustainable home ownership.” Said Carver.

Under the program designed for new qualified borrowers, individuals and families can receive down payment assistance of up to $10,000 (2.5%) of the home’s purchase price, a new mortgage tax credit, and a special interest rate reduction of .25% on all home loans (available for the initial 250 loans reserved by participating OHFA lenders). To find an OHFA-approved lender in your area, you can go to  MyOhioHome.org. Current mortgage interest rates and a variety of information regarding the OHFA’s programs can also be found at this link.

Some may ask, what can the down payment assistance be used for? This money can be used for pre-ownership expenses such as down payment or closing costs. With less out-of-pocket to pay, this program can definitely be used by potential borrowers who have student loan or other debts, but who still qualify for a mortgage.

A requirement that all first time homebuyers must fulfill before qualifying for this program is attending a free home buyer education session. You can search for HUD-approved housing counseling agency at this HUD link.

Through OHFA’s Mortgage Credit Certificate, first time home buyers can receive a direct federal tax credit on a portion of the interest payments. Through this benefit, home buyers can lower their federal tax liability by 40% with a maximum of $2,000 per year for the life of the mortgage. Something important to keep in mind is that the mortgage credit is in addition to the home mortgage interest deduction on IRS Schedule A.

To qualify for an MCC, a buyer must also meet one of the following requirements:

* Be a first-time home buyer—someone who has not owned or had an ownership interest in his/her principal residence in the last three years,

* Purchase a home in a target area—an economically distressed area designated by the U.S. Department of Housing and Urban Development (HUD), (download Ohio’s target areas from our download center or visit our target area maps page), or

* Be a military veteran who has received an honorable discharge.

* Occupy the property as the primary residence for every year the borrower claims the MCC. If the property ever ceases to be the borrower’s primary residence, OHFA may revoke the MCC approval.

* Qualify for the loan being requested. Borrowers must meet standard credit and underwriting criteria established by the IRS and HUD for the MCC Program. See IRS Publication 530.

Borrowers who want to buy a home should start shopping ASAP to be one of the first 250 who close their loan and receive the .25% interest rate reduction. If your career is one that offers a public service such as a police officer, firefighter, teacher, direct patient caregiver, military or veteran, you could be defined as an “Ohio Hero,” under the OHFA program. Having this title enables many first time buyers to receive an additional .25 percent rate discount and optional down payment assistance. The mortgage rate for Ohio Heroes with down payment assistance is currently 4.1 percent.

This mortgage product is available to the following full-time employees who are:

* Active Military, Active Reserve, or a Veteran – Qualified Active Duty Service personnel include Armed Services or Reserve Forces. Qualified veterans include military members honorably discharged from any branch of the U.S. Armed Forces.

* Firefighters, Emergency Medical Technicians or Paramedics – Sworn paid members of a fire department whose regular duties include fire suppression or prevention, emergency medical response, hazardous materials response.

* Health Care Workers – Certified, accredited, or licensed health care workers who are employed full-time as a medical resident or fellow, dental hygienist, nurse, nursing assistant, pharmacist, pharmacy technician, physician’s assistant, medical technician, technologist, or therapist.

* Police Officers – Individuals commissioned as a police officer by a federal, state, county, or municipal or township government, or a public or private college or university; must be sworn to uphold, and make arrests for violations of federal, state, county, municipal, or township law or respond to terrorism.

* Teachers – Individuals employed full-time by an accredited or state recognized public school, private school, or federal, state, county, or municipal educational agency as a state-certified classroom teacher or administrator in grades K-12 or higher education. Full-time instructors must teach a minimum of 12 credit hours per academic term. License and paystub from education facility required to validate credentials.

Graduates who have received a degree within the last 2 years (24 months), can also receive down payment assistance and a discounted OHFA rate through the Grants for Grads program.The rate for Grants for Grads applicants is currently 4%.

To qualify for the Grants for Grads product, you must:

* Be a first-time home buyer purchasing a single family home

* Meet OHFA income and purchase price limits. The limits vary by county.

* Be a high school graduate or have received a GED

* Apply for the grant within 24 months of graduating from an educational institute recognized by the US Department of Education‘s Database of Accredited Postsecondary Institutes having earned an associate’s, bachelor’s, master’s, or doctoral degree

* Obtain a mortgage through an OHFA participating lender

In addition, you must either:

* Complete a free home buyer education course offered by a HUD-approved housing counseling agency, or

* Use OHFA’s Streamlined Homebuyer Education.

All the information you could need on this program is available at this link.