Friday, November 20, 2009

Obama’s Home Modification Plan: 6 Things You Need To Know

At the center of the President Barack Obama’s ambitious plan to rescue the housing market is the concept that restructuring distressed mortgages will keep struggling borrower’s in their homes and help insert a floor beneath plummeting property values. With $75 billion dedicated to reworking troubled loans, that’s a big bet—especially considering that a top banking regulator said last December that almost 53 percent of loans modified in the first quarter of 2008 went bad again within six months. But supporters argue that notes modifications need to be properly engineered to work—and many early ones weren’t. To that end, the Obama administration on Wednesday unveiled fresh details on its plan to restructure at-risk loans and help as many as four million home owners avoid foreclosure. Here are seven things you need to know about Obama’s washington loan modification program.

1. Payments, not prices: The plan centers on the belief that struggling individual's will stay in their homes—even as values decline sharply—as long as they can make their monthly payments. Although not everyone agrees with this, billionaire investor Warren Buffett endorsed the philosophy in his most recent letter to shareholders. “Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its notes (so-called “upside-down” loans),” Buffett wrote. “Rather, foreclosures take place because homeowner's can’t pay the monthly payment that they agreed to pay.”

2. Thirty-one percent: To that end, the administration’s plan requires participating loan loan company to reduce monthly payments to no more than 38 percent of the individual's gross monthly income. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower’s monthly income. In lowering the payment, the servicer would first reduce the interest rate to as low as 2 percent. If that’s not enough to hit the 31 percent threshold, they would then extend the terms of the loan to up to 40 years. If that’s still not enough, the financial institution would forebear loan principal at no interest. The plan does not, however, require servicer to reduce loans principal, which Richard Green, the director of the Lusk Center for Real Estate at USC, considers a shortcoming. “For underwater loans, if you don’t write down the balance to be less than the value of the house, people still have an incentive to default,” Green says. “Writing down the principal first instead of last—which is what [the Obama administration is] proposing—makes sense to me.”

3. Cash incentives: To encourage participation, servicer will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower’s continues making payments. individual's, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.

4. Financial hardship: The Obama administration is pitching its plan as an effort to help responsible homeowners ensnared in the historic housing slump and painful recession—not speculators. As such, only owner-occupied, primary residences with outstanding principal balances of up to $729,750 are eligible. Occupancy status will be verified through documents, such as the borrower’s credit report. In addition, the program is designed to target homeowners who are undergoing “serious hardships”—such as a loss of income—which have put them at risk of default. To participate, person's will have to sign an affidavit of financial hardship and verify their income with documents. “If we would have had such stringent verification over the last four or five years, we probably wouldn’t be in as bad a position as we are in,” says Richard Moody, the chief economist at Mission Residential. But while Moody has no objection to such verification, obtaining documents from so many homeowners could be an onerous effort. “It’s going to be a very time-consuming process,” he says. Only loans originated on or before Jan. 1, 2009, are eligible, and modified payments will remain in place for five years. Now that the administration’s plan is out, lenders are free to begin modifying loans.

5. Net present value: To determine if a particular loans will be modified, the financial institution will perform a so-called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn’t. If the attorney loan modification loan is expected to produce more cash flow for the mortgages holder, the servicer is to restructure the loan. Howard Glaser, a loans industry consultant and a U.S. Department of Housing and Urban Development official during the Clinton administration, called this component of the plan “clever,” arguing that it would work to ensure broad participation. “When you apply the formula, the loans that are modified are the ones that are in the best economic interest of the investors to modify,” Glaser says. “The federal subsidy for the payment on the modification…tips the scale toward modification as a better deal for the investor.”

6. Second liens: The Obama plan also addresses the issue of second liens—such as home equity loans or home equity lines of credit—by offering incentives to extinguish them. But key details on this component of the plan remained unclear. “Distinguishing the second lien is really important,” Green says. “[But] exactly how they are going to convince the second lien holder to do this is not clear to me at all.”

New Program Affect Note Modifications Credit Scores

Starting Nov, 2009, individuals can have a little more assurance when it comes to loan modification company and how they impact credit reports negatively.

In the past, the effects of a loan modification company on one’s credit figures was somewhat of a mystery. Some financial institutions would not report late or partial payments to the credit bureaus during the trial alteration process while others would. This led to confusion among home owners, leaving many afraid of further damaging their credit with a home mortgage workout.

Thanks to new guidelines set forth by the Consumer Data Industry Association, home mortgage adjustments under federal programs Making Homes Affordable and the Home Affordable change Program are to be listed on credit reports as, “note modified under a federal plan”. This notification on the credit report will not have the same negative impact previous entries such as “partial payment” have had. In many instances, a report of a partial payment during the trial home mortgage change period could drop a people credit score as much as 100 points.

For the time being, FICO has agreed to take no action on these new entries… yet. Instead the credit reporting agency plans on studying the long term outcome of these loan s and then making an appropriate score assessment based on the success rate of modified loan s. As it stands now, note holders are supposed to report the loan as current if the people is current on their normal mortgage payment and is current through their trial. However, if a homeowner is behind on their payments as they begin the trial process, their late entries on their credit report will not be expunged. When the permanent home mortgage alteration is approved and implemented that is when their loan will be brought current, but the late that are currently on the credit report will continue to report on the credit report.

It is important to note that these new guidelines only apply to mortgage modifications under the umbrellas of the federal note adjustment programs MHA and HAMP. Individual lenders home mortgage changes do not qualify and the note holders will report to the credit agencies based on their specific policies. In addition, even if the people credit score is not affected by the “attorney modified under a federal plan” entry will still be visible on a individuals credit report, which may affect a lender’s decision somewhere down the line.

Ultimately, the decision still rests with the homeowner on how to proceed with their specific situation. While a home loan alteration may or may not have an impact on credit reports, the impact of a foreclosure or short sale on credit scores will most likely be far more severe.

Finally, FICO will wait one year in order to gather data on this new ruling to see if they will retroactively decide to report negatively on the home owners credit report. This of course will be an across the board decision. And yes, they will retroactively ding your credit if they decide that is the appropriate course of action. However, any creditor that pulls your credit will still see some type of term listed on the credit referencing a attorney alteration. This means the new creditor will be aware of the modification, which may impact their decision.

If you would like more information on home mortgage workouts, short sales, or refinancing, feel free to visit our website at We have live chat, informative blogs and pages of information designed to help you with your specific financial situation.

Where Are All The Mortgage Adjustments

Ever since the introduction of the Making Home Affordable and (HAMP) were implemented it became thought that the amount of modify my mortgage approved by servicers would balloon and that foreclosures would gradually decrease. In fact, exactly the converse has happened. Foreclosures are rising at a record pace while servicers continue to deny individuals adjustments on loans that should never have been approved. How did this happen and what can be done to fix it? The blame is shared by both the government and the banks themselves.

When the MHA and HAMP programs were revealed there was widespread relief among homeowner's. Sure there had been panic about the rapidly falling value of homes and adjustable rate noteswere getting out of hand, but now the government had stepped in and offered a solution. What was not known at the time was that the MHA and HAMP programs were only available to those with loans under Freddie Mac or Fannie Mae. Immediately, many borrowers were turned away by their loan company and simply told, “Sorry, you don’t qualify under these terms”. As a result, letters went out to governors, representatives, senators and anyone else who would listen in a position to change these programs. The response? Nothing. In its mind, Congress had done its part. There are obama loan modification programs out there, people should use them.

The only problem with this is that the guidelines and subsequent red tape that ensued proved to be an almost insurmountable barrier for individual homeowners to surmount. Countless stories in blogs, interviews and news reports all tell the same tale: a homeowner contacting their mortgage companies to try a loan modifications, being yanked around from different agents and offices and being told conflicting updates on the process, all while time ticks down on their property being foreclosed. mortgage companies are not required to tell homeowners why their notes modification has been turned down, and there are few set guidelines or criteria that the government requires lenders to conform to. After meeting a few basic guidelines, it is entirely up to the individual lenders on whether to approve a loan modificationsor not. All this has done is increase the confusion of the process by introducing conflicting accounts of what situations qualify for a loan adjustments.

It is little known that mortgage companies receive subsidies from the government under these programs for setting a borrower in a “trial loan modification”. This is a program in which the banks lowers the payment due on the loans while they review placing the borrower into a permanent modifications. There is no guarantee of a permanent settlement on the debt, and yet the lenders still receives money from the government merely for thinking about helping someone.

Sunday, November 8, 2009

A Few Points Folks Can Do To Dodge Foreclosure

There can be actions besides a foreclosure. Buying a house is a once in a lifetime investment. It really puts a increase on your funding resources. Of course, the expenses do not dead end with the down payment. Clients still must contend with the regular payments for the loan. That is a financial reality that We will have to deal with for years.

Additionally, even if you have defaulted on your loan or are in the middle of Michigan loan modification, it does not necessarily mean that your property will be foreclosed. There are several options to a foreclosure that you can consider.

Likely, all financial institutions are required to receive all the payments that were delinquent and reinstate the mortgage for the File Audit.

Some of the most often used methods of catching up a behind loan is to create a program with your financial institution where in you get to pay a piece of your back payments each month in addition to your normal monthly payments. In a position where you are not able to make the monthly note payments, your bank can opt to extend the forbearance by suspending mortgages for a specific period of time up until you can start a repayment period.

In a reamortization, the delinquent mortgage amount is added to the loan balance as a way of getting the loan amount up to date. This action increases not only the complete mortgage balance but also the monthly payments. The increase in payment will not be as massive if the life of the loan is also added to.

Some local governments and also private charitable organizations have instituted options that aid individuals with late payments pay all of their mortgage assets for a stretch of time.

A discrete sale of the home affected by the late can also be done as it will assist you to meet your loan as well as get any money that may have accrued. In private sales it is usual that the amount is greater than the stated amount owed on the mortgage.

Many of these steps presume that you will be able to pay your loan payments at some point. But there is also a particular foreclosure alternative called a loss mitigation program. The federal government as well as the banking industry implemented this type of service as a way of slowing foreclosures. Under this program you are given options that will not only assist you in keeping your home even if you do not have the financial capability to pay for the loan payments. With these types of programs, it becomes so much easier to address the problem of foreclosures.

Saturday, November 7, 2009

Senate Extends Home Acquisition Tax Credit

There has been much to do over the impending stop of the $8,000 first time home buyer tax credit. The tax credit is a incentive incentive that was set to expire on December 1st 2009.

The tax credit allowed first time home buyers acquiring their primary residence with a florida va mortgage to receive a tax credit of up to $8,000. With the expiration of the program many feared that purchase sales would slow and a market increase would be greater delayed.

Initial word are that the Senate has not only approved an extension of the first time home buyer tax credit, but an increase that would permit current home owners to also be eligible for a tax credit on a new house purchase as well even using Florida Hard Money Cash Out!

Sources within the Senate have hinted that there is a preliminary agreement to continue the so called “first time home buyer tax credit” until the end of April 2010. In addition they intend to expand the program to include a tax credit of up to $6,500 for home buyers that already own a house. The senate sources leekedthat one stipulation on current homeowners looking to purchase a new home and get the $6,500 credit is that they must have lived in their primary residence residence for the last several years.

It appears they will attempt to attach this new home buyer tax credit extension to the unemployment extension bill. It’s still unclear as to when the extension will arise for a vote, but this primary report is incredibly positive news for the housing market.

Many families have already been able to purchase a owner occupied home and take advantage of the first time home buyer tax credit. This 5 month extension and expansion will allow countless thousands more to benefit from it as well.

One point of concern for many home owners is not being able to access the tax credit early and use it as part of the down payment on their purchase. While HUD has allowed the use of the tax credit as down payment, financial institutions as we have seen all too often, have not gotten on board with it and widely ban the use of the tax credit for down payment. Third parties had been advancing borrowers loans to use as down payment in some reported cases. This is still not widely accepted by financial institutions and borrowers have had to wait until tax time to receive their credit.

If you have been in the time frame to buy a loan it looks like you will have until the end of April to get a Government incentive to do it!

No Income Verification Mortgages Still Available!

The last year and a half or so has seen a amazing chain of events happen in the New Jersey refinance industry with the shutting down of hundreds if not thousands of lending institutions and the elimination of many of the so-called “exotic” products.

When the dust finally settled only the most persistent have remained well positioned and able to lend to qualified families. We are proud to be among those standing tall and offering the very best of what is available today for the consumer. Along with standard New Jersey usda mortgage that we have available, we are among the few remaining lending institutions that can offer Stated Income Verification mortgages to our highly qualified New Jersey borrowers.

What sets apart “No Income Verification” from “Stated Income” loans?

The answer is that real “No Income” allows for the verification of a borrower's employment while allowing the income section of the application to remain [spin]empty. A “Stated Income” mortgage on the other hand, requires a home buyer to “state” an income to be used on the 1003 form, but not be verified. It must however, coincide for line of work that the home buyer's is in. In both cases, fund verification is a must and must be significant enough to warrant approval of the loan. There is no set calculation as only common sense will prevail. It is important to note that these products are for owner occupied properties ONLY and the person's MUST be self-employed or retired.

What is the upside of going with a “No Income” or “Stated Income” loan?

With the changes that have occured in the industry there is not a higher level of automated underwriting approval that allows for income to be accepted as stated therefore, the only selections available for the self-employed or retired borrower are those previously mentioned. Stated Income loans are allowed up to 70% loan to value (LTV) while No Income loans are limited to 60% LTV.

What make these products desired as well is that the interest rates are quite similar to Fannie Mae and Freddie Mac income verified mortgages. The add-on to the interest rate is .375% for No doc and .25% for Stated Income mortgages. To be more specific a 30 year fixed rate as of this blog posting would be 5.50% up to $417K for No Income and 5.375% for Stated Income. These programs are available for our 5/1, 7/1, 10/1 ARMS as well as our 10, 15 and 40 year fixed.

If you have been having difficulty proving your income with you normal mortgage company then a no income documentation mortgage may be just what you have been hoping for.

Can A Mortgage Alteration Lower Your Credit Report?

Many people these days are considering if they should apply for the government sponsored colorado map program Making Home Affordable. One of the major concerns folks have is what effect a loan alteration will have on their credit score.

Until now a colorado commercial mortgage was reported in various ways depending upon the individual bank and their reporting rules. Some banks would report a mortgage modification as “paid as agreed”, however, most would report them as “partial payment”, which has a derogatory impact on a person’s credit score. A “partial payment” report is a serious negative, in the same category as a foreclosure or short sale according to FICO spokesman Craig Watts. FICO, is one of the 3 largest credit reporting companies in the US.

New reporting plan

Starting November 1, 2009, mortgage companies are encouraged to use a new benign way to report government-sponsored loan alteration. Under guidelines put out by the Consumer Data Industry Association, lenders should report them as a “loan modificationunder a federal government plan”. CDIA is the association which represents credit bureaus. FICO, the leading provider of credit scores, will ignore this new notation for the time being. It will neither help nor hurt a home owner’s credit numberscore until FICO decides how to treat it. FICO says new mortgage changes will not hurt scores. “Once there is enough documented performance for people who went through a government sponsored loan modification, we will be able to assess the accumulated data to determine how predictive it is”, says FICO spokesman Craig Watts. As a rule the analysts prefer having at least a year’s worth of performance data before making any alterations to its credit-scoring formula.

Under the associations guidelines, if a person is current with his mortgage payments before and during a trialmortgage alteration period (typically three months), the lender is supposed to report the mortgage as current.

Starting November 1, 2009, if the loan adjustment is approved after the trial period, the lender adds a comment that it was modified under a federal plan instead of the dreaded “partial payment”.

If the mortgage was at least 30 days past due before the trial mortgage modification, payments during the trial period will not bring it above water. The lender will continue to report the appropriate level of delinquency, but if the note alteration is approved, it will reported as a loan alteration under a federal plan.


The new designation could affect a home owner down the road if FICO decides to treat it as a risk factor. Even if it never affects the scoring formula, potential mortgage company can see it on an applicant’s credit report and decide for themselves how to handle it. Have in mind that in a few cases the financial instituations will look beyond a credit report and study someone’s full credit history when determining a home owners’s credit worthiness.

How Note Modification Affect Credit Report

There are several ways a lower my mortgage payment may impact your credit score. Getting a mortgage workout does not automatically mean your credit adjusted, however, many people think that affiliate mortgage modification automatically impacted negatively and that is just not correct.

Homeowners who are current on their mortgage payments and have negotiated a permanent loan modification, without first going through a trial attorney loan workout will see no adverse affects on their credit reports. Remember that in order for your credit to receive a negative check, you as the homeowner either have to be late on the note payment or have not paid the monthly payment in full based on the original mortgage agreement.

If you have not been making your loan payments and you apply for a note workout, your credit score will have already been affected. For example, if your monthly payment is due on the first of December and you fail to make the payment by January first, a 30 day late entry will be added to your credit score. If a payment has not been made by February first, a 60 day late entry will be added.

In the past year, lenders have increased the number of attorney mortgage modification that they are agreeing to due to the addition of federal programs such as Making Homes Affordable and the Home Affordable Modification Program. In the past, banks relied on their own loan Alteration programs, but with the government incentives offered by MHA and HAMP programs, the volume of loan workout reviewed by banks has increased. With that in mind, the addition of these new programs usually requires the homeowner to sign up for a trial attorney mortgage modification as the lenders determines if you qualify for a permanent attorney mortgage workout during that trial period, which is usually three months. During that three month period the homeowner is required to make the new trial note change payments on time, else the permanent modification will be denied.

One of the main negatives of the trial loan Alteration ( is that the homeowner will receive derogatory marks on their credit report, even if they do at the end of the trial period qualify for the permanent modification. In general during the trial period, the homeowner will still receive a 30 and 60 day late entries on their credit report because they are not making the full payments as agreed upon in their original loan. Instead, the homeowner has agreed to a trial attorney mortgage workout at a lower payment.