Millions mortgage refinancing homeowners can't refinance their mortgages, due to home values decreasing well below their current mortgage balance. The recent downturn in the housing market has caused sharp decreases in home values across the country. Some areas were hit harder than others. Others had an unexpected job lost, medical expenses or child tuition payments due, causing a financial hardship to stay current mortgage refinancing mortgage payments.
Recently, the government issued new guidelines for homeowners having trouble making mortgage payments under the "Home Affordable Refinance" and "Home Affordable Modification" Programs. These new programs will help millions of homeowners to lower their monthly payments. But there may be some limitations for millions of additional homeowners.
The Home Affordable Modification program's 1st mortgage limit is $729,750. So if you owe more than $729,750, you can not participate in this program. (More on loan modifications later)
The Home Affordable Refinance only allows for loan to value ratios up to 105%. The program is an option for homeowners meeting those guidelines. As mentioned earlier, many home values have declined sharply in the past few years, with a good numbers way above the 105% loan to value limit. These homeowners are considered "underwater", owing much more than what their homes are worth. These homeowners would not be able to refinance under the program's current guidelines.
So how can homeowners falling behind on mortgage payments due to financial hardship possibly lower their mortgage payments without refinancing?
They can restructure their existing mortgage terms with lender approval. This service is commonly called a loan modification. What exactly is a loan modification? A loan modification allows the lender to lower the interest rate, change from adjustable to fix rates, defer and / or forgive any arrearages or change loan programs, thereby lowering your mortgage payments. Before the housing downturn, repayment plans and forebearance agreements were the norm. A loan modification is a relatively new option that is more common today in the mortgage industry.
When faced with late payments, homeowners will usually contact their lender to make payment arrangements. But you may have a hard time speaking to someone, due to the high volume of calls. Most departments that handle delinquent mortgages are under staff. When you do get through, you may get the run-around, being transferred to different departments. Due to frustration, some homeowners simply give up.
Negotiating for some homeowners may be a bit intimidating to say the least. Obtaining a loan modification can be done, usually between 1 to 3 months and in some cases longer. Also check the U.S. Department of Housing and Urban Development's website for useful information and resources.
Another option you may want to consider is hiring a professional loan modification service provider. Many owners of these companies have many years of experience as mortgage brokers, loan officers or have worked in the real estate industry. These companies specialize in negotiating on behalf of homeowners to restructure their mortgage loan to more affordable terms. They charge a fee, but they will aggressively work on your behalf until your loan modification is approved. Regular,repeated follow up calls to your mortgage company is key to successfully obtaining a loan modification.
A good company will already have contacts at the lenders who handle loan modification negotiations and has the authority to make changes on your loan. A good loan modification company will also have a dedicated staff of case managers working on your behalf and making regular calls to your lenders until a decision is reached with your file. Persistence pays off.
Be careful of loan modification companies that charge enormous upfront fees. Some companies will charge anywhere from $1,500.00 to $3,000.00 or more to work your file! This is way too much money to pay, especially then homeowners are already struggling to pay their mortgage or any other debts. Believe it not, there are service providers out there who honestly want to help their clients and charge reasonable fees, under $1,000.00.
Also beware of scammers who are taking an advantage of the housing crisis to prey on homeowners with financial hardships. Some of these firms take money from homeowners and don't deliver on their promise to perform agreed upon services. A reputable company will perform a free consultation to see if they can actually help the homeowner. If not, no money should be exchanged.
Besides refinancing or modifying a loan, homeowners may decide they can no longer afford their home and may have to sell. A "Short Sale" in which the lender agrees to reduce the amount owed may also be negotiated by loan modification companies. The proceeds of the sale after expenses goes to the lender. This type of sale prevents the homeowner from further damage to his or her credit and avoid a foreclosure mark on their credit history.
If the service provider can determine there is a good chance that your case will be approved, then a submission file is sent to your lender. It is very important that the file contains all required paperwork. Without it, this can cause delays in processing your file. Time is of the essence! The lender will request pay stubs, two years tax returns, bank statements and a list of your monthly bills and income. A financial harship letter is also needed so that the lender can get a true picture of your unique situation. Once a decision is made, the lender will send an amendment letter to confirm the loan changes.
In conclusion, only you can decide which option is best for you.
Desmond Primus has been in the financial services field for 19 years and strives to provide consumers with informative articles. If you would like more information, please go to: http://www.beckleycredit.com/main.html
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