Cash is King – Upside Down Mortgage Solutions

January 10, 2009

Loan Modification: Fannie and Freddie Streamline Modification Program

Listen in on a Interview I did on Loan Modifications and the Fannie Mae and Freddie Mac Streamline Loan Modification Program

“This article has been out for several months now and this are constantly changing. Find More information at my new home page Refinance an Upside Down Mortgage”

The Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, recently announced a new Streamlined Modification Program that is designed to help struggling borrowers avoid foreclosure by having Fannie Mae work with mortgage servicers to do a loan modification into more affordable terms.

You may qualify for a loan modification if all of the following are true:

  • Your mortgage loan is owned by Fannie Mae or Freddie Mac.
  • Your mortgage loan is 90 or more days past due.
  • You occupy the property as your primary residence and must be a one-unit property.
  • You are not in bankruptcy.
  • Loan originated prior to January 1, 2008
  • Your Debt-to-Income Ratio needs to be at 38% using current paystub (another obstacle). See Mortgage Debt-to-income Ratio Information
  • You will need to write a hardship letter so go to Sample Hardship Letter here.

To achieve a more affordable mortgage payment through a loan modification, your loan servicer may:

  • extend the term of your loan to as much as 40 years
  • reduce your mortgage interest rate for a period of time
  • defer payment of part of your principal, or
  • or offer a combination of all three.
  • Principal write-downs and principal forgiveness are prohibited. (This is HUGE)

Modification Options

Through the SMP, servicers may change the terms of a loan to reduce a borrower’s first lien monthly mortgage payment, including taxes, insurance and homeowners association payments, to an amount equal to 38 percent of gross monthly income. The changes in terms may include one or more of the following:

  • Adding the accrued interest, escrow advances and costs to the principal balance of the loan, if allowed by state law;
  • Extending the length of the mortgage loan as appropriate;
  • Reducing the mortgage loan interest rate in increments of 0.125 percent to an interest rate that is not less than 3 percent. If the new rate is set below the market interest rate, after five years it will step up in annual increments to either the original loan interest rate or the market interest rate at the time of the modification, whichever is lower;
  • Forbearing on a portion of the principal, which will require the borrower to make a balloon payment when the loan matures, is paid off, or is refinanced.

What You Can Do Today
If you are about to fall behind, or have fallen behind on your mortgage payments, or if your loan has been referred to an attorney, the most important step you can take is to get help early from your mortgage lender, servicer, or housing counselor.

Here are important steps to take immediately:

  • Call your lender or loan servicer to talk about your situation. You can find the contact information on your monthly mortgage statement or coupon book.
  • Gather the information you will need. You will be asked to provide:
    • letters or communications from your lender,
    • foreclosure notices,
    • recent mortgage statements showing your loan number,
    • homeowner’s insurance policy,
    • last two pay stubs and most recent tax return for all borrowers named on the mortgage,
    • proof of other income, such as child support, alimony, Social Security, or pension,
    • bank account statements, and
    • list of major monthly bills, including child care, utilities, credit cards, and cell phone.
  • Understand your options. Depending on your situation, you may have several options to discuss with your servicer or counselor. They could include:
    • Repayment Plan — You may be able to catch up on missed payments by creating a schedule for repaying the past-due amount.
    • Advance — If your mortgage is owned by Fannie Mae (your servicer has this information), and your missed payments are due to a temporary financial hardship, you may be eligible for an unsecured personal loan, such as HomeSaver Advance™, that is available from your servicer to help you get current with your payments.
    • Modification — In some cases, mortgage loan terms can be changed on a temporary or permanent basis to make the payment more affordable.
  • Avoid foreclosure rescue scams. Don’t become a victim. Foreclosure scams seek to take advantage of your situation.
  • Your financial situation may have changed significantly since you qualified for your home due to unemployment, divorce, job change/relocation, or medical issues. You may want or need to sell your home as a result of this change. There are options for borrowers who are worried about possible foreclosure:
    • Pre-foreclosure or Short-Sale — Servicers work with borrowers to sell their home and use the proceeds to pay off the loan even if the proceeds are not enough to settle the entire balance.
    • Deed-in-lieu — Borrowers sign over title to the property to Fannie Mae without the expense of foreclosure.

You have more options if you act quickly. Now is the time to ask for help!

Thanks to Mr. Mortgage here are some potential consequences for accepting the terms of a Loan Modification!

Home owners!  Accepting this ’solution’ means you:

  • acknowledge the full debt regardless of the value of the home;
  • waive all rights to fraudulent or predatory lending claims in the future;
  • turn your loan into a full recourse loan that could follow you for life even if you choose foreclosure down the road;
  • remain underwater, full-leveraged, renter for the rest of your life (in most cases);
  • will save no money at 38% housing debt-to-income ratio plus all other debts; (this is just an opinion and not factual.
  • may not discharge any of this mortgage debt through any bankruptcy even after foreclosure;

If widely accepted by home owners, this will ruin the American consumer and make housing a dead asset class for decades. If you are in a serious negative equity position when signing these forms, as most are, remember that you will:

  • never be able to sell your home
  • never be able to buy a new home
  • never be able to rent your home due to owner occupant provisions
  • be responsible for the full loan amount even if the value of your home keeps dropping for the next 10-years.

I know this is a whole lot of information but I wanted to be sure I made you aware of of everything in one shot.
If you find you don’t qualify or are unsure of what to do next please contact me at brent[at]brentlane.net.

Fannie mae has recently added a mortgage program that will help homeowners with an upside down mortgage refinance 2009 giving them some upside down mortgage relief.  I highly recommend looking into no closing cost refinance as a solution to your upside down mortgage

Learn more about Refinancing an Upside Down Mortgage- Get Your Free Report Here

Listen in on a Interview I did

on Loan Modifications and the Fannie Mae and Freddie Mac Streamline Loan Modification Program

January 8, 2009

Citigroup and Bankrutcy Judges Join Forces to Save Homeowners from Foreclosure

Learn more about Refinancing an Upside Down Mortgage- Get Your Free Report Here

News came out today that may help many homeowners who are facing problems with their mortgage.  Letting your house go because the home is upside down and you need help start with my free report and if that only wets the appetite then move on to my free video series on Refinancing an Upside Down Mortgage

You can also find help from my friend who is the Sacramento Short Sale Agent I recommend

Democratic lawmakers reached an agreement with Citigroup Inc. on a plan to let bankruptcy judges alter loans in an effort to prevent homes from going into foreclosure. Other lenders are expected to follow suit.

Known as “cramdown,” the rewrite would let bankruptcy court judges erase some mortgage debt to help bankrupt homeowners better handle their payments, subject to strict conditions.

The legal reform would help “millions of families save their homes,” said senators Richard Durbin of Illinois, Charles Schumer of New York and Christopher Dodd of Connecticut.

Michigan Democratic Rep. John Conyers has introduced the mortgage bankruptcy measure in the House of Representatives.

Under the terms of the reform as agreed, only mortgages entered into prior to the date of enactment of the bill would be eligible for the treatment, the senators said.

Homeowners would have to certify that they have tried to contact their lender before filing for bankruptcy, they said.

Only major violations of the “Truth in Lending Act” would invalidate creditor claims on bankruptcy, they said.

Schumer said his office has contacted top bankers nationwide and some said they would be supportive.

Officials at other top banks — including Wells Fargo (WFC.N), Bank of America (BAC.N), SunTrust (STI.N) and JPMorgan Chase & Co (JPM.N) — were contacted by Reuters but had no comment.

This latest adjustment to Bankruptcy law will help homeowners avoid any possible foreclosure and allow for someone other than the bank to make adjustments to the toxic mortgages that have plagued homeowners facing foreclosure.

Learn more about Refinancing an Upside Down Mortgage– Get Your Free Report Here

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