Mortgage Questions

Every situation is different, but there are common questions that come up.

Do I have to be behind to qualify?
The first qualification for obtaining a loan modification is a hardship. The first and most common hardship is being 2 months behind. There are other hardships that do not involve being behind. The first is if a borrower has recently become disabled. The second is if the borrowers were married and recently gotten divorced. The third is if one of the borrowers has recently died. It is important to remember that these three other hardships involved people who are actually on the mortgage. For example, if there is a married couple but only one is actually on the mortgage and the other spouse dies, the death hardship does not apply.

What Interest Rate Will I Get?
A loan modification does not depend on the interest rate. It is the reverse of applying for mortgage when you are given an interest and your monthly payment is dependent on the rate. The monthly payment is calculated based upon income. The normal guidelines say that the mortgage payment should be 31% of the gross income. So, for example if the borrower has $1000 a month in gross income, the mortgage payment should be $310. The interest rate to get this number is dependent on the size of the mortgage and the escrows, taxes and insurance.

Can I Get a Principal Reduction?
The short answer is no. Except for the settlement with U.S. Justice Department that involved the five major banks, the likelihood of obtaining a principal reduction is virtually zero. Even in the Justice Department settlement, only a very small amount of mortgages qualify.

Can I get a loan modification for my investment property or second home?
Yes, you can. Up until June of 2012, the answer would have been no. The Federal guidelines have changed and now it is possible. It is still in the lender’s discretion and there must be enough income to qualify, but, lenders will consider properties that are not the primary residence.

I have been turned down by my lender, can I still get a loan modification?
The answer is yes. About 80% of our clients either were rejected or gave up trying to receive a loan modification. Most borrowers do not deal with the decision makers or know how to properly structure their modification package. We deal with the lenders every day and know what they require for a successful result.

I have received a loan modification in the past and have defaulted. Can I qualify for another modification?
If you received your modification more than 12 months ago, you can apply again for a modification. However, you must show that since the first modification was granted, there was a change in circumstances such as loss of income, disability or the like. Keep in mind you may not receive the same deal as the first time.

I am already in a Chapter 13 plan, can I get a modification?
Yes you can. Many clients have received modifications while in going through bankruptcy. You can lower your payment to the lender and eliminate that portion of the payment to the trustee that goes to mortgage arrears.

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