Loan Modification – Becoming More Open to Short Sales

ONE avenue for escaping foreclosure may be getting a little easier to navigate: the so-called short sale, through which distressed owners sell their homes for less than the mortgage amount and are forgiven the remaining loan balance.

Borrowers were initially wary of short sales because they could not be processed fast enough to prevent foreclosure. Loan modification, which stopped the foreclosure proceedings, was a more popular option.

The Treasury Department has already announced an incentive scheme for borrowers to work out more short sales. Although details have yet to be released, major lenders seem generally supportive. Bank of America management executive David Sunlin believes that a more systematic negotiation scheme could help steer the industry in the right direction.

At the Bank of America, Sunlin added, internal policies have been changed to make room for more short sales. Before the shift, the finance giant followed Fannie Mae recommendations in which second lien holders were given about 10% of the balance on second mortgages where the bank held the first lien. Recently, the bank has agreed to take 5% of the short sale proceeds on loans where it holds the second lien.

The borrower is not off the hook completely, since after the short sale his or her credit score is likely to fall. But even then, the credit score would probably be far better than it would be after a foreclosure.

The point where people understand that sometimes you have to start over, A loan modification might help you in the short term, but sometime  people need to do is get out completely.

Countrywide Loan Modification

Countrywide is one of the biggest names when it comes to sub-prime mortgages, and subsequently in mortgage assistance and loan modification. The bank offers a loan workout option to borrowers in financial crisis, allowing them to stay in their homes while they talk their lenders into improving their mortgage terms.

A Countrywide loan modification is granted to homeowners who can prove that they are in real financial need, and that they can stay current once the loan is modified. To qualify, one must present a hardship letter explaining their situation, and financial documents such as pay stubs, bank statements, and tax returns for the past two years.

Other options are also available for borrowers who don’t qualify for a Countrywide mortgage modification. The most common alternative is a short sale, wherein the borrower sells his home for less than its fair market value and uses the proceeds to pay off the loan. Countrywide considers it a full payment, reducing the damage to the borrower’s credit.

Because of the large number of requests, a Countrywide loan modification application can drag on for several months. This is why it’s best to get a loan modification attorney to help you out. Working with a lawyer can ensure faster, better response from the bank, and more reasonable offers than you can get on your own.

Bankruptcy Loan Modification | New Bill May Help Stop Foreclosure

Families and homeowners struggling to keep their homes may soon have the government on their side. Last year, Senator Harry Reid of Nevada introduced S.2636, commonly known as the Foreclosure Prevention Act of 2008. The bill would, among other things,  allow bankruptcy judges to modify the loans of homeowners in distress to help them avoid foreclosure.

The bill has yet to become law, but if it does, it will benefit an estimated 600,000 families. The provision has three key points: to help keep borrowers in their homes, to help distressed communities recover from the housing crisis, and to help prevent future foreclosures.

For homeowners:
S. 2636 will put $200 million into pre-foreclosure counseling, programs that help at-risk households weigh their options and make smarter decisions. The program will help around 500,000 families get in touch with their lenders and work out better mortgage terms.

Housing Finance Agencies (HFAs) will also issue bonds for refinancing, with an estimated $10 billion increase in the current cap. This will enable HFAs to refinance existing sub-prime loans using funds from mortgage revenue bonds, originate new mortgages for first-time buyers, and provide multi-family rentals. Increased lending will then create new jobs and generate revenue in the local, state, and federal levels.

The bill will also change the Bankruptcy Code so that judges will be allowed to modify mortgages. This will help families get loan modifications even in bankruptcy, which normally prevents them from getting modification offers.

For communities and business:
The bill will put $4 billion into the Community Development Block Grant (CDBG) to buy and rehabilitate foreclosed homes. Foreclosed properties usually sit unoccupied in the market, reducing the value of other homes in the neighborhood. With S. 2636, communities with the highest foreclosure rates can use CDBG funding to buy these homes and put them back on the market.

Businesses can also benefit from this stimulus package by filing net operating losses (NOLs) in previous years in their tax returns, making them eligible for refunds. NOLs from way back in 2001 can be carried over to the company’s 2006 and 2007 losses, increasing the current limit from two years to five. refunds. For 2006 and 2007 losses, the

Preventive measures:
Finally, S. 2636 will simplify the disclosure requirements on mortgage paperwork. The Truth in Lending Act (TILA), which has long dictated transparency measures in mortgage lending, will be extended to refinancing documents as well. Lenders will now have to disclose the mortgage terms and the maximum payment within three days after the application and no later than seven days before the deal is closed. Violators will be subject to the same penalties as the TILA provisions, with the damages for mortgage-related violations ranging from $2,000 to $5,000.

Lenders are naturally opposed to this bill, and the Senate has yet to vote on it in the next Congress session. Meanwhile, at-risk homeowners can get assistance from attorney-backed loan modification firms who can help them find better loan modification deals.

Wells Fargo Loan Modification

Wells Fargo & Company provides a wide range of financial services including banking, investments, and consumer finance. However, as with most lenders in recent years, it has been particularly active in the mortgage market and mortgage assistance programs. With the recent economic slowdown, it has also started aggressive loss mitigation measures to help defaulting borrowers stop foreclosure and stay in their homes.

wells fargo loan modification

Homeowners with delinquent Wells Fargo mortgages may get loan modification offers directly from the bank, stating their eligibility for the home retention program. Loan modification involves working out better rates with the bank while foreclosure is stopped, allowing them to catch up on payments. While any borrower can apply for a Wells Fargo mortgage modification, the bank places priority on the most at-risk borrowers.

The main requirement for a Wells Fargo loan modification is a hardship letter detailing the circumstances of default. The borrower must state a valid reason for falling behind, such as a medical emergency or involuntary job loss. The bank may also require standard financial documents such as bank statements, tax forms, and pay stubs to show the borrower’s capacity to stay current after getting the mortgage modification.

A loan modification attorney can help borrowers get faster response, especially with the large volume of applications coming in. A capable lawyer can give the case additional leverage and get better offers than a borrower can obtain on his own. If the mortgage modification doesn’t work out, a loan modification attorney can also look into other alternatives such as repayment plans, deed-in-lieu, and short sales.

Thinking of Loan Modification in 2009 ? think again about Best Mortgage Moves in 2009

If you entered 2009 with decent debt, a good FICO score, and a stable income, this may be the perfect year to buy a home. The week of December 31^st saw mortgage rates drop to an average of 5.1 percent, an all-time low according to a Freddie Mac survey. And the good news is that they’re expected to drop even more in the coming months.

Experts are still divided on whether it’s wiser to buy now or wait. After all, the economy is still far from stable. It all comes down to your personal risk preferences: borrow now if you want to play it safe, wait if you’re sure there’s a better deal ahead. Here are some key points to keep in mind:

Shop around:

Twenty years ago, when rates never varied by more than 0.25 percent, one loan would have been as good as the next. But the plunging economy has put lenders’ offers all over the scale. Late last month, two major banks—Bank of America and Wells Fargo—offered identical 30-year conforming loans at 5.0 and 6.625 percent plus one point respectively. A rash buyer can easily miss these differences and get stuck with a 30-year mistake.

Check your books:

The rates may have dropped, but lending standards are still the same. The best deals are handed out to borrowers with a FICO score of 720 or more, or those who make down payments of at least 20 percent. If you don’t meet either standard, you’ll pay for it some other way, such as a higher interest rate or expensive private mortgage insurance.

Another big factor is your debt-to-income ratio, or how much of your income is taken up by mortgage payments. For Fannie Mae or Freddie Mac loans, the limit is 28 percent of gross income for mortgages and 36 percent for all other debts. Federal Housing Administration (FHA) standards are set to 29 and 41 percent respectively.

Get pre-qualified

Pre-qualifying for a mortgage can increase your chances of getting a good rate. This is simply because the deal closes faster. With the rates tanking, you can expect a lot of competition from buyers with the same budget and qualifications. The last thing a seller needs is a buyer who’s interested but unqualified.

Sign up for credit counseling:

You’d be surprised at how much first-time borrowers underestimate the costs of home ownership. Credit counseling can prevent costly mistakes by giving you a better idea of what you’re getting into. Warnings about maintenance costs, taxes, and over extension tend to get ignored, but many homeowners would have avoided tight fixes if they’d planned more carefully.

The fixed/ARM question:

Fixed-rate is still the best choice if you’re buying a new home. For one thing, most of the government support is geared towards 30-year fixed-rate loans. And since rates are expected to drop, most banks are no longer willing to originate ARMs anyway.

If you have an ARM that’s set to adjust this year, it may be more practical to keep it for now. With luck, it might adjust to a lower monthly payment in the next few months. ARMs that are indexed to the Treasury bill are in luck, as the yield is now at a very low 0.5 percent. This means that even with a normal spread, you’ll be enjoying a rate of about 3.25 percent.

Loan modification options:

Borrowers stuck with costly sub-prime mortgages can still take advantage of these market conditions. With foreclosures on the rise, many banks have found themselves burdened with bad debt and losing key investors. That’s why many of them are actually helping borrowers get current and stay in their homes.

One of the most common arrangements is loan modification, a deal wherein the bank and borrower agree to restructure the mortgage to more comfortable terms. The key requirement is a valid financial hardship: a medical emergency, unexpected job loss, or death of a spouse or co-owner. Lenders typically favor borrowers in serious delinquency or about to enter foreclosure, as the process stops foreclosure proceedings and gives them enough time to catch up.

Gavin: Mortgage Loan Modification Lawyer

Loan Modification – 5 Things to Consider Before Applying

Choosing a loan modification isn’t a decision you make overnight. Sure, it can be your ticket to a better mortgage, but it’s not a surefire way to solve your money problems. Like any other transaction, it has its challenges, and it suits some people better than others. If you’re not the right candidate, even the best loan modification attorney can’t guarantee the results you want.

Remember, loan modification is as much a commitment as it is a solution. If you’re considering a loan modification, here are some things you should ask yourself before making any decisions.

1. Do I qualify?
Each lender has its own policies, but the general requirement is that you have a job and be able to prove your financial hardship. This tells your lender two things: first, that falling behind wasn’t entirely your fault, and second, that modifying your loan can really help you back on your feet. If you’re still unstable or have no reason to request mortgage assistance, your loan modification firm won’t be able to help much.

2. How far behind am I?
It’s important to build a strong case to persuade your lender, but there are limits to how far behind you can be. It’s one thing to miss a few payments because you lost your job, but it’s another to deliberately miss half a year because of bad spending habits. As your debt accumulates, your lender perceives you as a high-risk borrower and may be less willing to work with you.

3. Can I afford it?
Depending on your situation, a loan modification can cost you anywhere from $2,000 to $5,000. But it’s not just a matter of having that much money in the bank. If you’re in a really tight fix and it’s the last of your funds, you may want to wait a bit so you’re not left with nothing in case your bank rejects your application. Your loan modification attorney can help you figure out a budget so you can plan it out better.

4. How much equity do I have?
Your equity value is probably the biggest factor affecting your lender’s decision. If you have enough equity to cover foreclosure expenses and deferred interest, foreclosure may actually be cheaper for your bank. However, equity is determined by the value of your property, which your lender can easily overestimate. Do some research beforehand to see how much your home is really worth, so you can face your lender with hard facts.

5. Can I stay on track?
A loan modification won’t free you of all responsibilities; it only allows you to meet them more comfortably. Once it’s granted, it’s no longer your attorney’s job to keep you on track. Make sure you have enough money saved up to cover initial payments when the mortgage reinstates, as well as an emergency fund. If something comes up and you fall behind again, the whole loan modification process will have been useless.