Is your Adjustable Rate Mortgage Causing Financial Distress?

Q) Is unemployment considered a hardship?

         A) Unemployment is considered a hardship but the lender will also want to make sure that the borrower will be able to make the modified payments. While social security and other payments can be factored toward the monthly payment, there is such a thing as too much hardship. If the homeowner cannot make his monthly payments as a result of becoming unemployed, the loan modification will probably be denied.     

Q) What if I have a bad credit score?

         A) Loan modifications do not rely on credit scores to determine eligibility. The lender’s highest priority is to be sure that the borrower can make the new monthly payments. If the low credit score is due to excessive unsecured debt the mortgage lender may ask for that debt to be settled for the loan modification to be approved.   

Q) What if I have received a Notice of Default?

         A) In most cases, an attorney can get the foreclosure process stopped as the negotiations on your loan modification are started. In most states, if you have received an NOD (notice of default) there is still plenty of time to achieve a loan modification before the Trustee Sale date if you qualify.

Q) I took out a second mortgage 8 months ago. Can I modify my first mortgage?

         A) Yes. As a rule, most lenders require 6 months seasoning between taking a second mortgage and applying for a loan modification. 

Q) Can I modify a loan on an investment property?

         A) Yes. Most lenders will accept loan modifications on investment properties. However, a loan modification under Obama’s Home owner Relief Plan does not include non-owner occupied properties.

Q) How long does the process take?

         A) Due to the sheer volume of loan modifications being done and the back up in lenders loss mitigation departments, the process with an attorney may take as little as one or as much six months to be completed. Unfortunately, most homeowners do not understand the process is different with various mortgage servicing companies. Based on the servicer, investor and loan modification company the process varies. Additionally, income and asset verification may need to be updated as well, further delaying the process.

Q) If I have equity in my home can I still qualify for a loan modification?

         A) It depends on the amount of equity in the home. Too much, and you probably won’t qualify unless you have had an extreme hardship and are unable to refinance. If you have equity but have been turned down for a re-finance you could very well qualify for a loan modification if you have an attorney representing you with lender relationships.

Q) Can I get a principle reduction?

         A) Principle reductions occur in only about 5% of completed loan modifications. It is possible that principle reductions could become somewhat more frequent under the formulas set forth under the Obama administration’s new loan modification program. We have seen principal reductions from investors when not expected and in extreme hardships.

Q) How will Obama’s loan modification program help me?

         A) The program will be initiated with FNMA and FHLMC and then spread out to other lenders. There are caps on mortgage payments relative to a borrower’s income and forbearance options which can push accrued, unpaid balances to the back end of the loan. The rollout will take time so if you are in jeopardy, act now to start your loan modification process. It is also important to understand that the lenders are being encouraged to participate but are not required to do so. The exception is that banks which have received bailout funds are required to participate. 

Q) If my loan modification is denied, is a short sale my next best option?

         A) Each homeowner’s situation is different but short sales are normally considered to be the next option after a loan modification. If the home is in foreclosure a postponement of the trustee sale may allow the time necessary to facilitate a short sale or short refi if you are found to be a good credit risk.     

Visit us at http://www.feldmanlawcenter.com   or call 800-588-0425

As a homeowner, when your financial situation prevents you from being able to keep up with your mortgage payments, there are a number of options to choose from. Among these is the short sale option. Due to the state of the economy, short sales have become increasingly common among Orange County homes and in some cases, it is the most recommended course of action for homeowners facing financial hardships.

Orange County property management professionals define a short sale as a legally binding agreement to sell the home for less than the amount owed on the mortgage.

One of the advantages of a short sale is that it reduces the negative impact on your credit. A short sale must be approved by the seller’s current lender(s). The process typically takes a minimum of 45 days for the lender to approve the short sale. The Mortgage Forgiveness Act of 2007, which has been extended to 2010, protects OC real estate home owners from debt collectors seeking monies owed beyond the sales price of primary residences.

Qualifying for a Short Sale

Any form of financial hardship may qualify a home owner for a short sale. A short sale is the best option for home owners facing difficult financial times in certain cases. Rather than walking away from a negative asset or losing your home to a bank foreclosure, a short sale will have a less severe impact on your credit. For more information regarding short sales on Orange Count and Newport Beach homes, contact your local short sale negotiators to learn more.

Daniel Poulos on ABC-TV News discusses how www.RealEstateRoadKill.com provides lists of lender approved short sales that are ready-to-close.

The numbers are staggering. In 2006 the percentage of Americans that were faced with a foreclosure was .58% of all house holds, in 2007 that percentage rose to 1% that is a 42% increase and 1% may seem like a small number but we are talking 1% of millions and millions of homes. For the state of Florida the percentage is double that of the nation as a whole with 2% of all Floridians entered into some stage of foreclosure and a total of 165,291 homes foreclosed on in 2007. Sadly, Central Florida has been among the worst hit by this trend with some neighborhoods beginning to become run down because of the vacant homes with unkempt lawns or rental homes with multiple families occupying them causing the home front to resemble a parking lot.

So what has caused this to take place? In 2005 the Central Florida area experienced a hot seller’s market that quite literally burned out of control. Houses were selling like hot cakes, listings were flying off the shelf faster than agents could believe – homes were listed one minute and sold the next. At the same time home prices were being drove up and up and up – ridiculously! It was unbelievable we saw $10,000 increases in that matter of 7 days! The market at this time pushed home prices up so high that the average person in this area could no longer afford to purchase a home based on the average salary in the area. The market needed some serious correcting, and the result; home prices plummeting over the past 12 months.

Many of the buyers in 2005 could only qualify for a two or three year (also known as sub-prime) adjustable rate mortgage. So their rates adjusted, payments went up leaving the homeowner no longer able to afford their payments and the ripple affect goes on and on leaving many Central Floridians without a paddle so to speak. A decrease in income due to the economic hardship has also become more apparent as many types of employment that supported the Floridian have drastically decreased, such as contractors and laborers. It is becoming more common to see developments stagnant as the funds and demand for homes no longer exists. For the lucky few who STILL have a good credit score and the option to refinance the adjustable rate mortgage, cannot do so! A home can only be refinanced for what it is worth. What is becoming a very common phenomenon is that the current adjustable rate mortgage EXCEEDS the appraisal value. Therefore, a refinance to a fixed rate mortgage is not possible. An example: Mortgage amount $300,000…current appraisal value $220,000.

THE FORMULA LEADING TO FORECLOSURE: An adjustable rate mortgage resulting in higher monthly mortgage payments, unable to refinance due to current value of home and/or current credit score, and personal and/or financial hardship such as a divorce or loss of income. Foreclosure will knock at your door!

The good news is that everything turns around and if you are able to stay in your home and ride this out, eventually property values will start going up again. If you have found yourself in the situation that you can no longer afford your mortgage payment either because your rate has or is going to adjust, increases in taxes or insurance premiums, perhaps there has been a sickness or disability in your household or someone has lost their job (there is certainly a lot of that going on these days) YOU DO HAVE OPTIONS AND YOU CAN AVOID FORECLOSURE and save your credit from the black eye that comes along with it! If you are behind on your mortgage or if you know you are not going to be able to afford the payment because your rate is going to adjust or any other reason you need to start exploring your options now.

We are offering free webinars several times a month on a reservation bases only and attendance will be limited. The purpose of the webinar will be to educate you on your options and help you decide the best way to move forward. Avoiding foreclosure will benefit you in the long run as the impact of a foreclosure on your credit rating is devastating. Reservations will be taken on a first come first serve bases. Follow the link below to reserve your spot now:

http://RealEstateRoadKill-Kissimmee.com