Mortgage Loan Modifications

Having trouble paying your mortgage? Are you staring into the dark, abysmal abyss that is Foreclosure? Before taking that irrevocable step off into the ether, consider Obama's Making Home Affordable plan which is meant to facilitate Mortgage Loan Modifications. Once you have submitted a loan modification application to your lender, the foreclosure process comes to a screeching halt. Which makes this a good stall tactic at the very least, in case you just need a bit more time to come up with your past due mortgage.

However you may feel about the stimulus package, can anyone doubt that keeping people in their homes helps society at large?

Pop quiz: True or False? This is the theory behind banks' willingness to modify your existing mortgage.

Answer: False. Banks and other large corporations couldn't care less about society. They only care about their bottom lines which makes them sociopathic by nature.

However, it IS in their best interest to stop the horrific slide into worthlessness that foreclosures beget. They WANT to work with you. And to ensure that they really want to work with you, there's some sort of carrot coming from the government.

How this affects you the end user: The goal is to bring your total PITIA payment (that's Principal, Interest, Taxes, Insurance and homeowner's Association dues) down to 31% of your income. The bank will do this by modifying your mortgage: lowering the interest rate, or extending the terms (so that you'll probably never actually own the house in this lifetime.)

I happen to have my mortgage with Chase, and they make it really easy - there's a link right on their website. If the entity that owns your mortgage is a shady operation, it might be more difficult. First call your loan provider or servicer and tell them you want to speak to someone about modifying your loan. When the option first became available, it was so new that sometimes the borrower knew more from researching on the internet than the "loan specialists." It seems to be getting easier as time goes by. If the person on the other end of the line stonewalls or tells you that modifications aren't available, you might have to engage the services of one of the many companies that has sprung up to facilitate the process. I haven't used any of them, and can't vouch for them. But first, do some research on your own. The government has made HUD counselors available to advise you for free, and there is a link on the www.makinghomeaffordable.gov website.

You'll also find self-assessment tools to find out if you're eligible. To qualify for a loan modification, you have to answer yes to the following questions:

• Is your home your primary residence?
• Is the amount you owe on your first mortgage equal to or less than $729,750?
• Are you having trouble paying your mortgage?
• Did you get your current mortgage before Jan 1, 2009?
• Is your PITIA payment more than 31% of your gross income?

Loan modifications are available even if you're in bankruptcy, by the way. BUT - at that point, the HUD counselors are NOT available to you. This is because technically, you're represented by your bankruptcy lawyer. Who probably doesn't know diddly about loan modifications.

For those of you who have kept up to date on your house payments, the Making Home Affordable program has something for you, too: a Refinancing that will bring your interest rate down to a mere ghost of its former self. Please note: if you're refinancing, you must be UP-TO-DATE on your mortgage payments when you sit down to sign the papers.

You do not have to be current on your mortgage payments when you apply for a loan modification.

However, you DO have to have income.

The first thing your provider will do is ask you a bunch of questions. And when they get to the part where they ask you if you're employed, you'd better be able to say YES. That can include self-employment. If you can't answer yes, then it may be time to consider getting a job, even if it's at the Pill Factory**.

** there really is a Pill Factory in my township. It's the only big employer nearby. They make nasty substances like Liquid Cocaine and Methadone, and the cancer rate for their employees is really high. When I need to light a fire under my derriere and get motivated to find new sources of income, I drive by. Once I even went in and asked the armed guard at the front desk (their version of a receptionist) for a job application, but they won't let the applications out the door. I wanted to tape it right above my computer, as a cure for writer's block. **

So whatever your equivalent is of the Pill Factory, you may have to bite the bullet and go work there.

You'll be supplying recent bank statements and tax returns, so you may need to boost your earnings before you apply, because the banks aren't in the business of loaning to the indigent -- at least not since the subprime crash, LOL.

And -- don't give them "enhanced" documents, because they're also going to request a form that allows them to get a Transcript of your tax returns from the IRS.

It will take your mortgage provider 30 to 90 days - at least - to review the documents and make a decision. They may also have to inspect the premises to assess whether the property has been maintained.

Past due mortgage payments will be rolled into the total amount due, or tacked onto the end of your mortgage. Isn't that nice? To have that deferred to 40 years from now, when we hope we will still be alive, and also better able to keep up with our mortgage payments.

Another odd fact: you'll probably be faxing in your document. That's because the bank doesn't want to have to scan all those pages. When you fax it, it's automatically scanned in.

My next post will be about the HARDSHIP LETTER, that magical document that is a window onto the borrower's soul, and a requirement of your loan modification application.

Right now, I have to go eat a delicious yet dirt-cheap meal. In this age of inflated food prices, no small feat.

If you don't see what you need, post a comment and I'll respond, but I hope this has answered your questions about Mortgage Loan Modifications.