What Can I Really Afford?

Now that you know some of your loan modification options, the next step is to figure out what you can really afford in a mortgage. Too many borrowers have relied on lenders telling them what they could afford in recent years, without really considering the lifestyle changes necessary to keep up with those payments.

Take Mark and Joanna, for example. When they began house hunting, their mortgage broker assured them that they qualified for a $420,000 mortgage. The problem, as this budget savvy couple realized, was that a mortgage of that size left them no wiggle room for life changes (such as a new job or even a growing family), not to mention any emergencies like an illness, large-scale maintenance project or a sudden job layoff. This couple did the smart thing: they scaled back their house budget to a mere $285,000 mortgage, leaving themselves plenty of money leftover at the end of the month to handle whatever life threw at them in the years to come.

Uncomfortable with what the mortgage broker was telling them, they went to see a financial planner, who took more into consideration than their lender. First, he looked into their plans for the future. Married for seven years, they were anxious to start a family once they had more space and Joanna knew that she wanted to be a stay-at-home mom, working no more than 15 hours per week. Had they not factored in this income change (not to mention the high cost of adding another member to the family), this couple may have found themselves struggling to make their mortgage payments in a year or two.

Another thing the financial expert pointed out: Mark and Joanne’s lender was using an interest-only loan option for the first two years, to keep their payment low, and wasn’t really considering if they could handle the readjusted payment later on.

Another thing to watch out for (Mark and Joanna did), was their real estate and school taxes. If your mortgage does not include these hefty sums, you may find yourself without the money to pay them.

Maintenance too, should be a real concern when figuring out what you can afford. If you’ve owned your home for any length of time, you know that things will need repair. Consider how much you need to save for annual upkeep.

Finally, look at your overall budget to see what you can comfortably cut. Be realistic here. When considering approving a loan modification, the most important thing a lender is looking for is your ability to make your payments – no matter what emergency or expense may arise! So if you aren’t willing to live without cable, internet access and a cell phone for the duration of your mortgage loan, don’t trim them from your budget in an a attempt to make the numbers “work.”

While becoming more common these days, loan modifications are a one-time offer, and you must live with whatever you agree to – or lose your home in the long run!

When looking at your overall financial picture consider these important factors:

• the true cost of home ownership
• your current a future income
• appropriate debt to income ratios
• setting up a realistic (and livable) budget
• unexpected emergencies/expenses
• planning for the future

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Are we going to get help from the lender?

Help From the Lenders

With a cost of more than $60,000 to foreclose on a house, and hundreds of thousands of filings every month, the mortgage industry is more apt than ever before to work with delinquent homeowners to find a mortgage modification option that fits their budget. Why? It’s all in the bottom line. The more mortgages they can salvage, the better bottom line they can report to their investors. After all, we’ve seen in recent months what happens when lending institutions foreclose on too many of their loans – they go bankrupt. With the demise of several of the nation’s biggest mortgage lenders in recent months, the industry has learned that the time to work with borrowers is now – if they want to save their bank – and their own jobs.

With hundreds of mortgage lenders holding billions of dollars worth of America’s mortgages, it would be impossible for us to highlight each lender (and their loan modification options) independently. So, we’ve chosen some of the nation’s largest lenders since they will likely offer the biggest variety of options to give you a better idea of the help available these days:

Countrywide FSB

Although company president David Sambol called for "unprecedented remedies,” to the nation’s mortgage crisis just last year, claiming that the mortgage holder was “determined to assist borrowers who have the willingness and wherewithal to remain in their homes, but need a little help to do it,” he couldn’t keep Bank of America from gobbling up the struggling mortgage lender in an attempt to hold off further economic distress due to the current crisis. Although Countrywide promised widespread relief for totaling more than $16 billion dollars in October 2007 ($4 billion of that in standard loan modifications), most Countrywide customers have reported little (if any) real help since the announcement.

However since the 2008 merger with Bank of America, some struggling homeowners have found help from the new ownership in many ways. See details below.

Bank of America

Since buying out the defunct Countrywide Mortgage lender, Bank of America has been inundated with requests from struggling homeowners seeking help. Some of the options offered on their website include:

· 12-month pre-payment plans for those who have fallen behind in their payments

· 1-3 month loan extensions

· Loan modifications for rate, loan terms and monthly payments

· Debt management services to help those struggling to make their monthly payments get back on the financial fast track

Wells Fargo

According to the Wells Fargo website, the bank has taken the lead in working with customers to help alleviate the financial strain they may be experiencing due to an unrealistic mortgage and/or adjustable rate loan. Eager to help struggling homeowners work out a plan to lower their payments and pay back any unmet payment obligations, Wells Fargo is now helping borrowers establish a family budget; reorganize their expenses; revaluate their mortgage needs and restructure their loans to better meet their needs. This includes repayment plans; loan modification; partial claims, short sales and deed in lieu of foreclosures.

In addition to offering these and other standardized loan modifications to original borrowers, they have instituted two unique programs (Project Lifeline and Fast-Track ARM Solution), geared toward finding solutions that work for individual clients.

First proposed by President Bush, the Department of Treasury and select industry leaders earlier this year, the Fast-Track ARM solution is a voluntary program that lenders can use to freeze current interest rate on sub-prime mortgages for the next five years. The goal is to enable burdened homeowners an opportunity to refinance, sell, or find a better paying job.

Project Lifeline is the company’s good faith effort to pause the foreclosure proceedings on qualifying borrowers for 30 days in order to give them time to find an equitable solution.

Wachovia

In a press release issued on June 30, 2008, Wachovia Bank announced that it would be taking a number of actions to help its mortgage customers deal with a challenging economy and declining home values including offering more loan modifications, repayment and refinancing options. However, the mortgage lender is discontinuing offering products that include payment options resulting in negative amortization including their popular Pick-A-Payment Plan in an attempt to help struggling homeowners find permanent solutions to their mortgage woes.

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I have just added these blogs to other blog networks

I hope the reading has been informational thus far, I will be posting a few more blogs later on this evening to continue informing my current followers that a modification of your mortgage is gong to happen, there is hope and it doesn't cost $1000's and a set of crossed fingers, lost hair, heart-attacks or strokes. I have added my blog to other popular blog sites to increase its visibility as well reach out to as many as I can. Remember, you can do this just do it right and fill out those submission packets correctly. Pay someone to do the documents for you if you have to, once rejected your time could be short. We can do this. Do not forget about the Q and A. Feel free to contact me anytime with any questions. Follow my blog now to receive email updates when my 60 days course makes new posts. As always stay informed.

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reBlog from keepmyhouse.com: Loan Modification Blog | Keep My House | Mortgage Modifications

I found this fascinating quote today:

I am not entirely against having the government secure loans or requiring homeowners to pay PMI on certain mortgage loans. Up to this point, these programs have helped more people achieve the American Dream of Homeownership. However, when these same programs are working against homeowners during an unprecedented economic crisis, I think it’s time to review the real purpose of these programs. Lenders need to start relying less on mortgage insurance and more on loan modification to mitigate their losses and help more Americans keep their homes.keepmyhouse.com, Loan Modification Blog | Keep My House | Mortgage Modifications

You should read the whole article.

reBlog from keepmyhouse.com: Loan Modification Blog | Keep My House | Mortgage Modifications

I found this fascinating quote today:

• In 2006: Family B took out an interest-only second mortgage with a balance of $60,000, an interest rate of 4.4%, and a term of 15 years.


• Today: Family B has $60,000 remaining on their interest-only second mortgage because none of the principal was paid down.


• Under the Second Lien Program: The interest rate on Family B’s interest-only second mortgage will be reduced to 2% for five years. This will reduce their annual interest payments by $1,440.


• After those five years, Family B’s mortgage payment will adjust back up and the mortgage will amortize over a term equal to the longer of (i) the remaining term of the family’s modified first mortgage (e.g. 27 years if the first mortgage had a 30 year term at origination and was three years old at the time of modification) or (ii) the originally scheduled amortization term of the second mortgage.

keepmyhouse.com, Loan Modification Blog | Keep My House | Mortgage Modifications

You should read the whole article.

WHAT Does foreclosure Cost my Lender, ME??

DID YOU KNOW ???

The average foreclosure costs a lender more than $60,000 in filing fees, auction fees, and lost revenue?

The Actual Cost of Foreclosure....

The cost of foreclosure is high: borrowers lose their assets (and their homes); while lenders are stuck with homes that aren’t worth the amount owed on them, plus they are forced to spend tens of thousands of dollars on legal fees; property taxes; and other carrying costs. This has left both lenders and borrowers scrambling to find ways to survive the mortgage crisis -- together! No longer adversaries, today’s desperate borrowers and struggling lenders are finding new and innovative ways to work together -- before both lose everything. Oftentimes this is in the form of a loan modification.

If you’re about to lose your home, or just feeling trapped by your mortgage, than this book will help you to better understand what options are available to you now .. and in the future. Now, let’s get started learning more about mortgage modification, and how it might free you from the financial bondage you find yourself in …

Here are five important facts about foreclosure that you just simply may not know:

1. One in every 200 homeowners will face foreclosure this year

2. One child in every American classroom is at risk of losing their home to foreclosure

3. Six in every 10 home loan borrowers wish they knew more about their loan terms and had asked more questions before signing onto their current mortgage

4. Six in every 10 mortgage homeowners are now delinquent

5. More homeowners in 2008 fell into foreclosure than in any other time of American history – INCLUDING the Great Depression!!!

WHY? Why are we in this modification whirlpool, sucking up almost every American Homeowner?

The American homeowner is in crisis! With more than 300,000 families facing foreclosure every month, it’s no wonder people are in a panic!

For the first time in American history, property owners are losing their homes in record numbers; banks and mortgage companies are closing their doors under the financial strain of unpaid debt; the real estate market is tumbling; and the nation’s economy is in turmoil. It isn’t just about keeping people in their homes any longer – it’s about saving our nation’s economy before it disrupts the way everyone lives and works!

How did we get into this mess in the first place? Many analysts have taken on that question in recent months, so we won’t attempt to explain the entire financial picture here. What we will attempt to do is give you a very basic understanding of today’s mortgage crisis, and the part we all played in creating it.

It seemed to have snuck up on us all so quickly. One year, real estate was at an all-time high. First time borrowers were scrambling to get into their dream palaces thanks to low interest rates and some creative financing options. House flippers were making money like crazy and then – boom – the bubble burst! Within months, millions of families were forced to face an unsettling realty: they could no longer afford to stay in their homes. Then, it got worse. Tumbling real estate values throughout the nation left them unable to either sell or refinance their loans. Before anyone knew it, foreclosure had become an everyday occurrence in every segment of our society: the inner city; the suburbs; and even the high-end real estate market.

Did it all go downhill that quickly? Of course not! The signs were there for months (years even), for those who cared to notice, that is. Unfortunately, neither banker nor buyer considered the impact their actions were having on an entire industry. And, now we’re all paying the price.

Who’s Really to Blame?

So, who really started this mess? Was it overzealous (and sometimes even unscrupulous) lenders, eager to approve faulty loans; or greedy homeowners anxious to move into bigger and better homes they couldn’t dream of owning just a few years earlier, with little thought (or care) as to how they were getting there? Whether anyone wants to face it or not, the stark reality is this: the current mortgage crisis was fueled by greed and ignorance on the part of the borrowers who wanted more and found a way to get it and the lenders willing to prey on them for a quick profit. Some knew what they were getting into; and some didn’t. Both however, took a gamble, and many lost.

There are, of course, other factors fueling the current mortgage mess: interest rate increases; lower property values; and scheduled mortgage adjustments, to name a few. Making matters worse, the majority of homeowners in recent years were also allowed to finance their closing costs, leaving them with little (if any) equity in their homes to weather the impending storm.

SIMPLE LIST OF HARDSHIPS LENDERS CONSIDER

HERE IS AN EXAMPLE LIST OF HARDSHIPS THAT LENDERS WILL CONSIDER

Adjustable Rate Mortgage – reset payment shock

Military Duty

Illness

Medical bills

Loss of job

Damage to property

Reduced income

Job relocation

Failed business

Death of spouse or co-borrower

Incarceration

Marital separation

These are just samples of what Lenders consider hardships, and also the most common hardships that are actually accepted for the various modification programs that are currently being offered. Unfortunately lenders are no longer accepting credit card debt as valid hardships because honestly, credit cards are unsecured debt and the credit card companies have no recourse, unlike the lender, who can and will take your home

NEED AN EXAMPLE OF A HARDSHIP LETTER: Example of Hardship Letter #1

Here is a Hardship Letter Example

To Whom it May Concern:

I am writing this letter to explain my situation as to why I have become delinquent on my

mortgage payments to your company. I have done everything in my power to make ends meet

but unfortunately I have fallen short and would like you to consider working with us to modify

our loan. My number one goal is to keep my home and I would really appreciate the opportunity

to do that.

The main reason that caused me to be late is (insert reason here, but don’t be too lengthy). My

income was not nearly enough, and I could not get caught up on my payments. I do not have

the money to pay the past due amount that is due. At this time I have exhausted all of my

income and resources, and that is why we are turning to you for help.

(The approximate date of hardship and state that the situation is temporary or will be

permanent)

My situation has gotten better because _____________ and I feel this loan modification would be

beneficial to me. I would appreciate it if you could work with me to lower the past due amount

or lower the payment amount so I could keep my home.

I truly hope that you will consider working with me and I am anxious to get this settled so I can

put this situation behind me.

NEED AN EXAMPLE OF A HARDSHIP LETTER: Example of Hardship Letter #2

Due to a recent adjustment to my current mortgage I have with your company, I am finding it

very difficult to afford the new, adjusted payment. The original term of my loan was for a fixed

rate payment for three years, then adjusting every 6 months after that. This loan is scheduled to

adjust again ________.

Considering my current income, there will be no way I can afford the increased payments coming

up. Hopefully there is a way to renegotiate the terms of my current mortgage in order to avoid a

foreclosure of my home.

I would like to request that my adjustable rate mortgage be converted to a fixed rate mortgage.

If this can be done, then I will know exactly how much my payment will be on a permanent

basis.

I have had no problems making my payments for over three years now (or the term of the fixed

rate period) and I do not want that payment to change. My mortgage was done with another

lender and sold to your company. The original terms are terrible but it was the only loan I could

qualify for at the time. I was assured refinancing would be no problem, but that has become

impossible because of what has happened in the housing industry.

The biggest problem is that my property is now worth about ___% to ___% less than what I

paid for it, which is preventing me from refinancing. I was told about mortgage modifications

from a friend of mine and upon further research have made the decision to try it myself.

I hope this explains my current situation that I find myself in along with a large percentage of

many homeowners.

Thank You,

_________________________

EXPLANATION OF A HARDSHIP LETTER

EXPLANATION OF HARDSHIP

What changes or events have occurred since your loan was originated that have

caused you difficulty in keeping up with your payments?

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

How did this impair your ability to afford your mortgage?

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

When did the change (s) or event(s)

happen?___________________________________________________________

_________________________________________________________________

Do you anticipate any improvement to your financial situation in the near future?

Yes _____ No _____

If yes, please explain:

_________________________________________________________________

_________________________________________________________________

_________________________________________________________________

How much are you able to contribute to your loan as of today?______________

How much are you able to contribute towards your loan in the next 30 days?

_________________________________________________________________

Do you really know what a Modification is? How about Forebearance or a Short Sale?

What is a loan modification?

A loan modification is precisely what it sounds like. It is a change of the current terms and

conditions of your loan to better suit your finances and allow you to keep your home and become

current with your payments. These changes can include but may not be limited to altering the

interest rate, waiving of late charges, reduction of principle, removal of adjustable rates to be

replaced by fixed rates and several others. These changes will be negotiated and made on a

case by case basis. Many people find this to be an excellent alternative when traditional

refinancing is not available if they are having trouble making their payments or will not be able to

make the foreseen payments as a result of an adjustment in their interest rate.

What is forbearance?

Forbearance means you are allowed to delay or alter your payments for a short period of time. It

is understood that there will be an increase in your payments temporarily until your account is

brought current. There will be no fundamental changes in the original terms of the loan. A

modification will change the terms of the loan and provide you with the peace of mind that your

new agreement is tailored to your current financial situation. In addition, the past due amount

owed the lender of the loan is also subject to negotiation and can be substantially mitigated if not

entirely abolished.

What is a short sale?

A short sale occurs when a borrower owes more on a home than its fair market value. In order

to avoid foreclosure proceedings and damage that does to one’s ability to open lines of credit in

the future, the borrower will elect to sell the home below market value after reaching an

agreement with the lender to settle the debt for less than what is owed.

What is Predatory Lending We are Constantly Hearing About?

What is predatory lending?

This is a term that can apply to all aspects of the mortgage industry and refers specifically to the practice in which a creditor misleads a borrower about the terms, fees and other aspects of the loan being sold to the borrower. Federal laws such as the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), as well as many states laws, require creditors to disclose certain terms of their loans to borrowers. When those terms are not property disclosed or are inaccurately portrayed these laws provide legal remedy in the source of monetary penalties against such creditors. This kind of action will lead to an approval for a modification.

Just one example of predatory lending tactics is the classic bait and switch. This is when a smooth talking loan officer says you will qualify for a great rate but when you sit down at the closing table that great rate suddenly isn’t so great anymore.

Appraisal inflation has been a common practice of predatory lenders. By stating that a home has a higher value through a faulty appraisal the lender can convince the borrower to take out more money than the home is worth to boost the lender’s commission and monthly income in way of a higher payment. This also creates a hardship for the borrower over time as the amount of their loan is higher than the fair market value of their home. This will make it impossible for the homeowner to qualify for refinancing to get out of a high interest or adjustable rate loan.

Elder abuse is another common form of predatory lending. Retirees often have substantial amount of equity in their homes and are prime targets for greedy originators. The amount of available equity allows the originator to increase the amount of closing costs charged to the borrower as well as the monthly payments. This provides for a higher commission for the originator and more monthly income for the loan servicer.

Some forms of predatory lending are so easy to spot that it takes just a few moments glancing at the paperwork for an experienced mortgage attorney to uncover these violations. Others are more intently obscured and require an in depth knowledge of the homeowner’s rights. This is why it is necessary to have the best in legal representation assigned to your case. We are usually able to determine whether there was a violation within the last 30 minutes and can then advise the borrower whether or he or she has a case that will result in a solution.

Can you still get a loan modification if you are unemployed?

I woke up this morning poured a cup of coffee and started wondering if people who tried to modify their own mortgage really had anywhere to turn to ask real questions to real people who do this for a living. So I said, I have been familiar with this industry for quite some time now and why don't I just address some of the common questions the Do It Yourselvers have.

Lets be clear on one thing no matter what, if you are unemployed, you don’t have a paycheck coming in to make your mortgage payment. If you are trying to get your loan modified, a key question is: Can I still apply for a loan modification if I have lost my job?

With Foreclosures still on the increase, the financial crisis is at the worst it has been. The unemployment rate is only adding to the mayhem. More people are being laid off from their jobs adding to the perpetual cycle of foreclosures. When this crisis began, the unemployment rate was not at an all time high. It was a prerequisite for a loan modification that a homeowner was employed. Now the unemployment rate is in the double digits, lenders are faced with more and more homeowners being jobless.

A lender still wants to see that your income will be able to support a modified payment but they are willing to be flexible. If you are unemployed you can use your unemployment benefit in place of your regular paycheck. You would send your lender copies of your benefit checks as proof of your income.

You have to minimize your expenses! This is a must in order to try and balance the decreased amount of income coming in. It is like preaching to the choir but sometimes we need to hear it anyways: If you are in this situation and if aren't currently looking for a new position right away. Honestly, some say that it is best to wait until the last possible moment to apply for your loan modification until you find a job but in this market that could be 6 months from now. Start the process right away because it takes time and keep your head up and hope that you will be able to secure employment in the mean time.

If the lender feels that you will have another job lined up or several interviews for new positions, they are more likely to approve your loan modification.