In case you didn't see it, my latest story, about modifying your mortgage....
If you know you’re headed for trouble with your mortgage or you already are there, brace yourself.
It’s a mess for borrowers trying to re-negotiate the terms of their mortgages right now. That’s despite a highly publicized, $75 billion, Obama Administration program that pays lenders to modify loans.
If you need to get a new deal on your mortgage – as millions of people do -- the best thing you can do is to arm yourself with information, about the problems you’ll face and what you can do to get around them.
“People are confused,” said Kevin Walker, president and chief executive officer of MortgageReport.com, a new website that helps borrowers learn if they’re e eligible for loan modifications. “Frankly lenders are still trying to figure out the procedures they’re supposed to follow to implement these programs.”
Not many loans are being modified under the Making Home Affordable program, which was announced in February.
By mid-May, the Treasury Dept. reported that the program had resulted in 55,000 loan modifications so far. Lenders can modify loans on their own, not using the program. Hope Now, an industry coalition that’s trying to combat the flood of foreclosures nationwide, said its members had independently modified 127,000 loans in April and made 143,000 new repayment plans, a record number.
But even those figures combined are a drop in the bucket against the Obama program’s stated goal of helping up to 9 million homeowners refinance or modify their loans.
Nothing has turned back the tidal wave of foreclosures sweeping Florida and the nation. Between January and the end of May, the Center for Responsible Lending estimates that 1 million new foreclosures were filed nationwide. Moody’s Economy.com expects 1.54 million new foreclosures this year, on top of 1.44 million foreclosures last year.
Still, the program is new and some lenders appear to be still kicking its tires.
In South Florida, Allen Robinson, managing partner of First Trust Mortgage Corp., said lenders don’t seem interested in drastically altering mortgages. They aren’t reducing the principal owed, he said, but are cutting rates or extending terms.
And there’s the problem of loan servicers handling a flood of applications. Jessica Cecere of the Consumer Credit Counseling Service of Palm Beach said she thinks fewer than 2 percent of loans are being modified.
“We haven’t necessarily seen a lot of denials, just not a lot of answers,” she said.
Lenders say they’re trying to keep up with the demand, but the number of troubled borrowers is huge and still growing. In April, almost 3 million home loans nationwide were 60 days or more delinquent, according to the Hope Now alliance.
“The pipeline of people requesting loan modifications has grown tremendously since March,” said JP Morgan Chase spokeswoman Nancy Norris.
Lenders and services are making some efforts to meet the demand.
Chase has opened five offices in Florida devoted only to loan modifications, including one in Aventura and one in Miami. Norris said Chase can modify loans from Chase, Washington Mutual and a small lender named EMC. Those loan offices are open evenings and weekends.
Wells Fargo, which owns Wachovia, has put details of the program on a special website devoted to mortgages, www.wellsfargo.com/homeassist.
What can you do if you need to rework your mortgage loan? Here’s some advice:
This is easier than you think. Start off at www.makinghomeaffordable.gov, the official Treasury Department web site for the program.
You’ll find such details as you can refinance your loan using the program if you are current on your payments, but if you’ve fallen behind, you’ll need to seek a loan modification.
The site points out that loans that are “underwater” – where the value of the home is less than the current mortgage – can qualify, for loans that are up to 105 percent of the home’s current value. Moody’s Economy.com estimates that up to 15.9 percent of all home loans are “underwater” to some degree this year.
Seriously underwater loans – those where the home’s value has dropped more than 20 to 25 percent – won’t qualify.
Lenders will be given financial incentives to modify loans.
The Treasury says it will share the lender or servicer’s cost of reducing payments to some borrowers, plus it will pay up-front fees of $1,000 for each loan modification and up to $3,000 for
three years for successful modifications
Borrowers have the potential to gain, too. The Treasury can make payments in loan modifications that would reduce the principal owed by up to $5,000 for borrowers who make timely payments for the first five years.
Some web sites will show you the terms of the loan modification program and figure out whether you qualify.
One is MortgageReport.com, which comes from the same firm that created SimpleTuition.com, a student loan comparison tool. MortgageReport.com gives borrowers a “diagnosis” for their loans. There is no charge to borrowers, who input their loan amounts and other debts. But users who do qualify for a modification will be provided with a list of lenders. Borrowers can then decide whether to send on their own information.
Another site has the advantage of providing borrowers with a free credit score. Fair Isaac, the company that produces the FICO credit score that is commonly used for mortgages, launched Mortgage ReliefOnline.com in April. The site, which is also free to users, allows you to see if you qualify and then refers you to mortgage counselors
You can also get help the old fashioned way -- by talking to someone.
You can find thousands of U.S. Department of Housing and Urban Development-trained counselors by calling the local consumer credit counseling service or through the federal Hope Now program, 888-995-Hope (4673).
Get your documents together
“Be prepared,” said Dale Vermillion, a mortgage industry consultant and author of Navigating the Mortgage Maze. “Have your credit report available and know your credit score.”
Expect to be asked for copies of recent tax returns or pay stubs, information on your loan and any other loans, including a car loan, student loans and personal debts.
Don’t give up
“The first three or four people (you speak to) don’t have any power at all,” said Ryan Smart, vice president of RightTrack Financial Services, a Delray Beach firm that negotiates loan modifications. “The whole system exists to keep people away. They give you “negotiators” who have no power to negotiate the loans.”
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Keep going until you get to someone who does have the power to change your loan.
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