Loan Modification

Almost 16 months after investigation into robo-signing began, a deal has been reached between feds and 5 of the nation’s major loan servicers: 

• Bank of America
• GMAC/Ally
• Wells Fargo
• Citi
• JP Morgan Chase 

The settlement goes down as the largest consumer financial protection settlement in US history and settles state and federal findings that servicers violated state foreclosure laws. Borrowers in 49 states (Oklahoma did not join the settlement) will be eligible for relief including: 

Principal reduction for eligible borrowers:  Homeowners behind on their payments will be eligible for loan modifications, including first and second lien principal reduction. Due to the number of borrowers affected the reduction is expected to…

Back in May – I listed a new CT short sale for sale -  a single lien Bank of America FHA loan. Within days we secured a very strong buyer and a complete short sale package headed to the lender.

After reviewing the sellers documentation, Bank of America immediately refused to process for a short sale as they determined the sellers should be in a loan modification instead.

HUH? The seller is RELOCATING FOR EMPLOYMENT. Relocation and loan modification don’t belong in the same sentence.

The package was resubmitted with a very clear explanation for why a loan modification would not be the answer to my relocating sellers problems. We were promised this would go straight to short sale and my sellers would not be harassed for a loan mod.

WRONG!!!…

A lot of my CT short sale clients have either considered a loan modification or been turned down for one by the time they have made the decision to short sell.

In a loan modification the lender makes permanent changes to the terms of your mortgage resulting in a more affordable payment. Keep  in mind that while a modification will reduce your payment, it will not reduce the amount you owe on the property. In my opinion, this is the main reason most loan modifications ultimately fail. Loan modifications are not long term solution for anyone with heavy negative equity.

However a loan modification may be a good solution for those who:

• Have a stable financial situation including steady employment

• Do not have significant negative…

Will applying for a loan modification postpone my foreclosure?

No, not usually. The time to pursue a loan modification is as soon as you feel you will no longer be able to afford your mortgage. Loan modifications can take many months to process. Six months to over a year is not unheard of. The time to start considering this is not once you are actively in foreclosure. It is not uncommon to be foreclosed on while waiting for your loan modification to be approved.

The same goes for listing your house for sale. Contrary to popular belief, simply listing your house does not stop the foreclosure process from moving forward. Having a buyer will usually make it possible for you to get an extension or slow things down but simply listing the home does…

Are you dealing with a Connecticut foreclosure and running out of time?

Resolutions take time. Short sales take time, loan modifications take time, and deeds in lieu take time.

Banks are not very effective at communicating their workout plans to their attorneys, and attorneys will frequently move forward with a foreclosure, even if you are in the middle of a workout with your lender.

This is preventable.

Connecticut offers a foreclosure mediation service. This is free to qualified homeowners. Basically the state will assign a mediator to help you deal with your servicer (bank) in court, and most importantly help you get the time you need to get through a workout with your lender.

The offer to sign up for mediation generally comes at the…

Who do loan modifications really help? The borrower? Are they really a helping hand from the bank to pull sinking homeowners above water?

A lot of people, realtors included, do tout loan mods as the best way to do the right thing and "save the home", instead of defaulting.

I'm going to have to blatantly disgaree.

Have you ever read through the terms of an actual loan modification?

Example:

Over the summer I have a client contact me to short sell his home. He owes 280k on the loan and is 8 months behind. The payment is in the low 2000's/month. Soon after I list the home, the bank contacts him to modify. Excited, thinking he might be able to save the house, he goes through process. My client does not live in this home and it needs about…