A good financial hardship letter is direct, to the point and not too lengthy. A homeowner should be specific and not provide reasons that are unclear or too technical to follow. Along with the reasons for falling behind on monthly loan payments it is helpful to provide dates that coincide with the reasons or events that led to the current financial situation. The letter should state that there is a willingness to resolve the issue through a workout solution such as a home loan modification with the help of a loan modification attorney. This is a preferable alternative to short sale as a homeowner will be able to stay in the home. Home loan modification is a way to avoid bankruptcy as well.

Examples of realistic hardships that could be included in a hardship letter include;

• Medical or health related issues that would make it extremely difficult or impossible for a homeowner to maintain employment at the same level as before.
• Substantial pay cut or a dramatic decrease in salary either at one time or over a period of time.
• Fixed income.
• Single parents with no child support.

Unfortunately for many, going through a divorce, legal issues that have nothing to do with the home loan, being a student or overextended are not good reasons for requesting a home loan modification so it’s wise to exclude those from your hardship letter. A homeowner’s hardship letter should be honest but convincing. Bear in mind that financial institutions see a great quantity of these letters each and every day. As trained professionals, if a homeowner is dishonest or “lays it on too thick”, trust that this will be easy to see through.

It can be a wise decision to seek the help of a loan modification attorney to assist with the home loan modification process if there is any uncertainty as to how to proceed. Working with hundreds of distressed consumers who have been through the process before provides a breadth and depth of knowledge that the average homeowner just does not have. A good hardship letter can lay the foundation for a workable solution that relieves the stress brought on by a potential foreclosure.

Is the Home Affordable Modification Program (HAMP) coming to an end?

Homeowners have expressed concern over longer than expected delays in both paperwork and approval and disappointment in the outcome of their applications as a result of these issues. According to the most recent report issued by the Department of Housing and Urban Development each month that provides details of the program for the preceding month, there are 4 loan servicers/program participants that “need substantial improvement”:

• Bank of America, NA;
• J.P. Morgan Chase Bank, N.A.;
• Ocwen Loan Servicing, LLC; and
• Wells Fargo Bank, N.A.

As of this month, the Treasury Department started withholding financial incentives for three servicers: Bank of America, NA; J.P Morgan Chase Bank, NA; and Wells Fargo Bank, N.A. The Treasury will not withhold financial incentives owed to Ocwen Loan Servicing, LLC for this quarter as their compliance results were negatively effected by a large portfolio acquisition during this time. Servicers under the Home Affordable Loan Modification are required to address all issuers of non-compliance.

In the month of April, the report indicates that 29,000 homeowners received a trial HAMP modification, and 29,000 additional homeowners received a permanent modification with a average payment reduction of 37 percent—or more than $500 every month. It appears that the program works for some but not all but the program has assisted over 4.8 million modification arrangements were started between April 2009 and the end of March 2011.

The projected end of the Home Affordable Modification Program, though slated for December 2012, is a long way off. The economy is still far from stable and between now and that date much could change that could delay the end of the program. The coming months will be crucial in determining the overall scorecard for the Home Affordable Modification Program.

A short sale would mean that the house is sold for an amount less than the former homeowner owes the bank, but the bank may agree to write off the amount that is left on the loan. They can also require the former homeowner to pay the difference, but these payments will not be in the form of monthly payments like their mortgages.

There may be benefits to a short sale, but there are also some consequences of avoiding foreclosure in short sale. The fact that a short sale is a negative blot on the credit report if the bank chooses to report it is one major outcome of this type of deal. A mortgage modification attorney will be able to explain more about this aftereffect.

The deficiency judgment, the amount the homeowner continues to owe the bank on the property after short sale, may be too much for the homeowner to handle. It could be a large amount of money that the homeowner does not have in full. Serious consideration must be given before making this sort of deal and a mortgage modification attorney can help people see what may be waiting for them in the future.

Homeowners have to pay property taxes. They will still owe these taxes if they have been unable to pay them in the past, even if they agree to a short sale of the property. One way to ease the pain of paying these property taxes is to find out if they qualify for tax relief under the Mortgage Forgiveness Tax Relief Act. Homeowners can inquire about this possibility by contacting a mortgage modification attorney.

If a short sale is not possible, homeowners have the option of seeking a loan modification. A loan modification is a renegotiation of the contract, which results in new terms that are, hopefully, more favorable to the homeowner. A loan modification also requires the services of a mortgage modification attorney who has years of experience in the practice.

Hiring a company to help with the loan modification process is a tremendous help if the following steps are followed by the customer. First, the home owner must have all of their documentation in order. This means copies of pay stubs, annual taxes, monthly bills and budget list all need to be in order to easily speed up the loan modification process. The second step is the homeowner needs to keep the home from falling more than 3 months behind in payments, thus keeping out of the foreclosure process. If the home is already in the foreclosure process it is more imperative to try to hire a loan modification company to assist, primarily because they will not give up on calling the lender over and over. This next tip to speed up the loan modification process is the most important; the documentation expires every 30 days! That means that every 30 days the homeowner needs to resubmit pay stubs, taxes if necessary and monthly bills. This part of the process is also why it is helpful to hire someone to handle this because the homeowner does not have the time to deal with the lenders; they need to be working to get the money for the loan modification or to keep the loan out of foreclosure.

Most lenders will then come back to the homeowner with a temporary offer, usually three month payments and then a loan modification if the payments were received on time. Late payments break the terms of the temporary agreement and the homeowner has to start all over again. Having a professional company keep track of all the due dates, documents and constant calling to the lender is one of the most successful ways to speed up the loan modification process.

The most common options available for homeowners is a home loan modification or a home loan refinance. These loan options has some similarities but are generally completely different. Understanding the difference in these options will allow a homeowner to decide which choice is best for them.

A home loan refinance is basically an entirely new loan. The homeowner must have sufficient equity in their home in order to qualify for this loan. The homeowner must also have a stable source of income. They can not have any delinquent, or derogatory, information on their credit reports. Many homeowners choose a home loan refinance to obtain a lower interest rate, lower payment, or to pay off other debts. People who are interested in doing a home loan refinance are encouraged to obtain interest rates and fee quotes from several lenders. This will help insure they receive the lowest rates, and fees, available.

A home loan modification is when a lender modifies the homeowner’s current mortgage loan. Majority of mortgage lenders require a homeowner to be having financial difficulties in order to obtain a home loan modification. This type of transaction involves restructuring the debtor’s current mortgage loan. Many times the homeowner is able to obtain lower interest rates on a home loan modification. They are also, typically, able to receive lower payments on their loans. Many lenders will add any delinquent payments back into the loan while doing this process. They may also extend the terms of the loan out past the original maturity date.

Basically a loan modification is for individuals who have experienced a financial hardship. Many times homeowners who obtain a loan modification have experienced a decrease in their home’s equity. People who are seeking a loan modification must go through the lender their mortgage is currently with. They are unable to seek quotes or options from other lenders. Home loan refinances, on the other hand, are typically for individuals with good credit standing and sufficient equity in their homes. Both types of mortgage tools are designed to help a homeowner obtain a lower interest rate and payment when possible.

In some cases the best bank loan modifications to consider are the federal government modifications, which do not charge any fees. It is of utmost importance during this modification process to be in contact with your bank on a regular basis, to keep them abreast of this process.

Many times getting approved for these bank loan modifications are a must, so your home is not involved in a foreclosure, possibly due to a loss of a job, sickness, or other hardship. Long before you are in state of possibly losing your home you need to be in contact with your bank explaining your personal situation. Keep in mind, sometimes it may take quite awhile for you to get bank loan modifications completed, due to the large amount of people who have sent in their applications also.

One of the best attributes of securing your loan modification, is many times your monthly payment on your home is decreased, close to one half of what your previous payment used to be. Of course there are always exceptions to the rule. But either way, you should save a tremendous amount of money on payments every month. This should help you in a significant way in keeping to your budget.

Once your bank loan modifications are approved, be sure that you can afford the new payments. The last thing you need is to have a collection agency harassing you because you can’t afford your monthly payments.

Make sure that your payments are never late, especially when you have your loan modification approved, because if you are late, this agreement can be revoked by the bank loan modifications department. The chances of getting another loan will be impossible or nearly impossible, if you are late regarding your payments.

In regards to paying on time, there are sometimes incentives from the bank to accrue some of your payments and place them directly to your principal and give you credits(money) toward your payments over time, due to having your payments on time. These are great incentives and benefits for you making your payments in a timely manner, for your bank loan modifications.

What is the Application Process for the Federal Loan Modification Program?

You can expect a bunch of paperwork and a ton of headache if you decide to go it alone in getting a modification of your mortgage through the program. The rules are complex and the instructions are similar to trying to read a 30-page contract written by lawyers for lawyers. Unless you are experienced in finances, you would be well advised in seeking the help of someone who has years of experience in handling loan modifications. You will be required to produce identification, proof of income and your last income tax return.

Who qualifies for the Federal Loan Modification Program?

In order to qualify for the mortgage modification program, you must show serious financial hardship that will leave you no choice but to default on your mortgage. Additionally, your outstanding mortgage cannot be more than $729,750. Mortgages beyond this point will not be approved or refinanced through this program.

How Will the Federal Loan Modification Program Help Me Lower my Mortgage?

The federal refinancing program will help you lower your mortgage payments to a maximum of thirty one percent of your monthly gross income. This is achieved by a combination of lower interest rates and extended loans of up to forty years. Mortgage modifications are initially offered on a trial basis but permanent modification is guaranteed if you make your new mortgage payments on schedule for at least six months.

Take-Away for Federal Loan Modification Program Assistance

Filling out the paperwork can be a complicated procedure and probably best done by someone with a lot of experience in Mortgage Modifications. As long as you make your new mortgage payments on time you will remain in your home and own it free and clear at the end of the mortgage.

There are two main ways to get a Wells Fargo mortgage modification: an in-house loan workout and a government-backed plan. This article walks you through both options and the pros and cons of each one.

Proprietary workout plans
The private loan modification plan is set by Wells Fargo itself, meaning they can change the rules as necessary. On one hand, this gives you more flexibility over your mortgage, as they can adjust the terms to suit your needs. On the other, you will have to negotiate harder with the bank to get the right terms, as there are no strict standards to follow. This is usually an option for those who don’t qualify for the federal loan modification plan.

The most common Wells Fargo loan modification under this plan is for an interest-only period, which can last up to ten years. In some cases, they can also agree to lower the payments for a given number of months. Terms similar to those of the federal program are also available, although they’re more susceptible to change.

Federal loan modification
Wells Fargo is also part of the government’s stimulus program, known as the Home Affordable Modification Plan (HAMP). The program offers an incentive to lenders who grant loan modifications to struggling homeowners. The main advantage of HAMP is that the standards are set, which means all you have to do is meet the guidelines. It may not offer a perfect fit like the Wells Fargo loan modification plan, but it guarantees comfortable rates.

HAMP evaluates homeowners for Wells Fargo loan modification using four factors: debt-to-income ratio, target payments, the home’s current value, and the current state of the mortgage loan. Each factor may weigh in differently according to the borrower’s situation, so it’s important to plan out your application.

For both plans, one can work directly with the bank or hire a loan modification company. If you choose the latter, however, it’s important to do your research and watch out for scam companies. Remember, when it’s your home at stake, it always pays to weigh your options and take on as little risk as possible.

Do you qualify?
First, make sure your financial situation fits the profile set by Fannie Mae and Freddie Mac. Obviously your mortgage has to be backed by one of the two—you can usually find out by checking the Fannie Mae website or calling your lender directly. The second main requirement is that the home’s mortgage value must be at least 105% higher than it’s current market value. A loan modification attorney or financial adviser can help you make the calculations and see if your mortgage fits the bill.

Get the paperwork
Your lender will want a clear picture of your financial situation, particularly the circumstances that made you fall behind. The best way to do this is to provide as much documentary evidence as possible. Most lenders will require a copy of your most recent mortgage bills, bank statements, tax returns, and pay stubs for the past couple of months. Some of these can take a while to obtain, so make sure to start early.

Write a hardship letter
The hardship letter is one of the most important parts of your loan modification application. This is where you add details to support the documents you send in, and vice versa. Keep everything simple and truthful, and avoid dwelling on details. Instead, focus on the facts and emphasize your means of getting back on track. Make it brief and straightforward—remember, the loan modification agent reads about a thousand similar letters a day, and a five-page letter isn’t likely to get you on their good side.

Work with a lawyer
Getting in touch with your bank is the most tedious part of applying for a loan modification program. This is why a loan modification attorney is often a good investment: even if you pay more, your application moves faster and you save your home sooner. A good lawyer can also give you financial advice, help you choose a good loan modification program, and negotiate with your lender for more reasonable mortgage terms.

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