Mike West

LOAN MODIFICATION

It is an unfortunate fact that far too many homeowners are in financial distress right now and are having trouble making their mortgage payment, or have stopped paying all together. Many did not understand all of the ramifications of the commitment that they made when they signed their mortgage papers during escrow. Others understood the possible changes that would be made at some time in the distant future but were sure that the worst case scenario would not happen to them.

Irrespective of the causes of this phenomenon, it has had a major impact on our economy, not to mention the families involved. Many homeowners are struggling to meet their commitments even if they have not incurred financial hardship. Some have decided not to continue to pay for a mortgage with a balance that far exceeds the current market value of their home. Others have incurred a serious financial hardship that makes it impossible for them to continue to make their payments.

So what does a homeowner who is mired mortgage hell suppose to do?

Although most homeowners want to keep their home, the unfortunate truth is that many will not. The individual homeowner’s circumstances and their mind set in dealing with their situation is the key to success.

The first step in trying to save one’s home is through loan modification.

What is a loan modification? A loan modification is a process through which your lien holder changes one or all of the following:

• Your interest rate
• Your principal balance through a reduction
• Your loan terms (examples: from adjustable to fixed rate, extend term of loan from 30 to 40 years, payment reduction for a specific period)

This process can allow borrowers to stay in their property when they can no longer afford their current payments. Homeowner must provide documented proof of any hardship.

Why would a lender modify a loan? It is all about their bottom line! They have realized that in some cases it is better for them to work out a solution with current borrowers to lower payments or possibly improve loan terms in order to keep homeowners in their homes. The average foreclosure can cost a lender from 35 – 60% of the current value of a property, so keeping borrowers in their homes is frequently a cost effective business decision for the lender.

What do I need to qualify for a loan modification? According to the Making Home Affordable web site (http://www.MakingHomeAffordable.gov), you will need the following information for your lender to consider a modification:

Information about your mortgage – such as a copy of your monthly statement

Information about any second mortgage or home equity line of credit on the home

Account balances and minimum payments on all other debts such as student loans, credit cards, installment loans

Your most recent Federal income tax return

Information and statements for all assets and asset accounts

Information about your monthly gross income (before taxes) for your household, including recent pay stubs and documentation covering all other income

It is also advisable to include a letter describing any circumstances that caused your income reduction and/or the increase in other expenses (job loss, divorce, death in family, major illness, etc.).

More on loan modification to follow.

Mike West

Certified Distressed Property Expert

Short Sales

What is a short sale? A short sale is transaction in which the seller is attempting to sell their property for less than they owe the lien holder or lien holders. In almost all cases something has happened that prevents the homeowner from being able to make their mortgage payments.

The difficult part of this process is getting the lien holder or lien holders to accept the short pay. Short sale properties are available everywhere and offer the potential of being a GREAT BUY. However, they usually take a long time to complete and, because many lien holders can not or will not accept a short pay, many attempts at a short sales fail. Also, many buyers give up in frustration and move on to another property because they get tired of waiting for lien holder's approval.

Do I qualify for a Short Sale? Qualifications for a short sale include any or all of the following:

• Financial Hardship - an acceptable reason (as determined by the lien holder) causing the homeowner to have trouble affording their mortgage payment. Some acceptable reasons include; death in the family, serious injury impacting a wage earner's income, loss of job, major reduction in income... to name just a few.
• Monthly Income Shortfall - You have more month than money.
• Insolvency

In all cased the homeowner must document the reason they can not make their payments. Tax returns, pay checks, documentation from employers are part of the paperwork required.

The fact that the value of your home has declined and your mortgage payment is too high given the current market value is not an acceptable reason.

More on Short sales will be posted soon.

New Foreclosure Prevention Act For California Now Law

California's new Foreclosure Prevention Act went into effect on May 22, 2009. The object of the exercise is to delay the foreclosure process an additional 90 days, extending the period to a total of 180 days for those who qualify. The object is to provide more time for lenders to work with borrowers to provide loan modifications, turning "non performing assets" into productive loans and keeping borrowers in their homes.

The question is, will it really help or is it just politics as usual? As with so many of these statutes, in order for them to survive the political process little viable substance remains. The end product is narrowly defined and the number of distressed home owners that will benefit is limited.

The 90 day moratorium applies ONLY if:

• The loan in default is in first position (a first, not a second)

• The loan was recorded between January 1, 2003 and January 1, 2008

• The borrower occupied the home as their principal residence at the time the loan became delinquent

• The loan servicer has not implemented a "comprehensive loan modification program

• The loan is not make, purchased or serviced by a California state

•· or local public housing agency authority and he loan is not

collateral for securities purchased by any such agency

• Imposing such a moratorium will not require the loan servicer to violate contractual agreements for investor-owned loans

• The borrower has not surrendered the property, as evidenced by a letter confirming surrender of the delivery of the keys to the lender

• The borrower is not currently in bankruptcy

• The borrower has not contracted with an organization, person or entity whose primary business is advising people who have decided to leave their homes regarding how to extend the foreclosure process and avoid their contractual obligations to mortgages or beneficiaries

It will be next to impossible to find a lender who does not claim to have a "comprehensive loan modification in place." Of course, the lender's definition of a "comprehensive" program may differ slightly from the borrower's definition.

Although contracts between loan servicers and investors are confidential, we assume that a substantial number prohibit the loan servicer from modifying loans.

State legislators are setting up a web site through which lenders can apply for exemption from the moratorium. We expect that site to be busy once it becomes active.

A more extensive review of the statute can be found here:

http://www.cdpe.com/images/fbfiles/files/California_New_Foreclosure_Law.doc

Is there a light at the end of the tunnel?

Feedback indicates that the Federal Making Home Affordable program is having an impact. Unlike the Hope for Homeowners program that was stifled by eligibility requirements and received less than 100 applications nation wide, the Treasury Department reports that over 120,000 homeowners have actually completed loan modifications with the Making Home affordable program.

It is good to hear that a Federal program is actually working. Not just another marketing scam so prevalent in the market place today!

For the complete RISMEDIA story select this link:

http://rismedia.com/2009-06-11/federal-homeowner-program-may-be-making-a-dent-in-foreclosures/

Here is the link directly to the Making Home Affordable program:

www.makinghomeaffordable.gov

As always, let me know if I can be of any assistance in helping you with a distressed property situation. I will be pleased to help.

Mike West

Realtor, Sr. Loan Consultant, e-PRO, Certified Distressed Property Expert

(916) 337-0658

SENIORS BEWARE!

Not all reverse mortgages are created equal.

Federal banking regulators are concerned about reverse mortgages and related consumer protection issues.

Reverse mortgages are loans for borrowers over 62 years of age who can live off the equity they have in their homes as they get older. There are no monthly payments for the borrower. They are borrowing their equity. After they die the home becomes the property of the bank.

Most reverse mortgages are insured by the Federal Housing Administration. However, there are new products on the market that are “proprietary.” These products offer the consumer less protection.

Concerned that the “proprietary” reverse mortgages have the earmarks of the subprime mortgages that were a major cause of the mortgage “melt down”, they are working to develop regulations to eliminate misleading marketing.

If you are considering a reverse mortgage make sure that the product you select is federally insured.

For more information select this link:

http://www.money.cnn.com/2009/06/08/real_estate/reverse_mortgages.reut/index?postversion=2009060813