This morning I received a call from a homeowner looking to do a Loan Modification. I will call her Jill. She had a divorce one year ago, recently lost her job, but has started a new part time job with hopes to be transition into a full time position in one month. Her current take home pay is about $775 per month. Her monthly mortgage payment is $892. Of course Jill has to buy food for her two children, pay utilities, and pay for gas to get to work.
Can she get a Loan Modification or is she facing a foreclosure? How can Jill take charge of the process? Her main goal is to save her home and stop a foreclosure. She also wants to protect herself and her children.
Two Steps In the Loan Modification Process.
One step in the process is to determine whether she can get the upper hand thru legal action with her mortgage company. You may wonder how this can be done. There are several different approaches. Let me review two of these with you.
The first is called "Produce the Note" defense.
After purchasing her home, her mortgage company probably did not keep her mortgage loan. They probably sold it to an investor who packaged it with other mortgages and sold investments in that package to investors on Wall Street. These investments were bonds.
Technically the note she signed at closing has to be passed on to each party at each step of the way and is to be held by the end investor. With the volume of mortgages done from 2000 to 2006 most companies did not pass the original note on to the end investor. Frequently the original note was misfiled along the way.
Lawyers specializing in foreclosure will ask the judges to have the mortgage company produce the original mortgage note to show that they, in fact, were the true owner of the mortgage. If the mortgage company cannot produce the note, the case can be thrown out. In 2007 this actually happened in several foreclosure cases in Ohio when the mortgage company could not produce the note.
The main purpose of this strategy is designed to get a delay in the foreclosure. The goal of the lawyer representing the person facing foreclosure is to get the mortgage company to negotiate a monthly payment that their client can afford and enable them to keep their home. However, mortgage companies have become more savvy in 2009 and are making sure that they have the original note.
A second strategy, which is proving to be more successful, is providing evidence that the original mortgage company who sold you your loan, made legal errors or misled you and may have violated federal or state laws.
Some one who is qualified in reviewing your signed loan documents can quickly determine if your mortgage company or loan officer had said anything to you which was different from what appeared in these documents.
Many times there is a prepayment penalty on the note, or as a rider to the note, which was never disclosed to the homeowner during the process of obtaining the loan, even at closing. I have seen situations where the loan officer was actually allowed to close the loan they originated, and never revealed to the homeowner prepayment clauses or Adjustable Rate terms.
One tactic that loan officers use, is changing the agreed upon interest rate to a higher rate or even to an adjustable rate on the closing documents. The homeowner finds out at closing after weeks of providing information and documentation to obtain the loan. Sometimes the homeowner was led to believe that they were getting a regular thirty year mortgage, then at the closing table found out that it was a 2/1 or 3/1 Adjustable Rate Mortgage.
An attorney can help you gain the upper hand and stop a foreclosure process if there has been any legal misrepresentation. It also enables them to have the upper hand in negotiating a more favorable settlement for the homeowner with their mortgage company.
So now it is evident that this can be a two way street. Your mortgage company can take legal action against you, or, you can take legal action against your mortgage company. To take control of the loan modification or foreclosure process you may want to go to court.
If you feel legal action is the solution, don't make the mistake and try to represent yourself. Hire an attorney or contact a company who specializes in loan modifications or foreclosures to represent you. They are skilled in knowing what to do and how to do it. If you try to represent yourself, your chance of being successful is greatly reduced.
So will Jill be able to save her home? If she takes action, she will most likely qualify for some kind of loan modification program. The lender may even offer her a lower rate, extended term, and in some rare cases, a lender may even reduce the principal amount owed.
Monday, June 29, 2009
Monday, June 8, 2009
Refinancing Goals
Refinancing
You've probably heard it often -- another friend or neighbor has refinanced and is enjoying lower monthly mortgage payments. You may have read headlines that talk about mortgage interest rates reaching historical lows. So, you ask, is now the best time to refinance my mortgage? Refinancing is essentially paying off your existing mortgage and taking out a new one. This section discusses the basics of refinancing, such as the reasons for refinancing and the steps involved. It also discusses your financing options. After you understand these basics, your Mortgage Consultant can help you with more information or get the refinancing process started. When does it make sense to refinance? Refinancing can help you lower your monthly payments, withdraw cash via the equity in your home, or switch to a different loan program that better suits your needs. Being clear about your refinancing goals will help you choose the loan program that's right for you. What are your goals for refinancing?
● I want to lower my monthly payments
● I want to access ready cash
● I want to shorten the term of my mortgage
● I want to switch to an ARM or a Fixed Rate Mortgage
Refinancing to lower your monthly payments
Refinancing to lower your monthly payments is easy: you simply switch to a loan with a lower interest rate. How do you know when to refinance? A good rule of thumb is to wait until interest rates drop .75%-1% below your current rate. Another way to lower your monthly payments is to switch to a different type of loan. Interest rates on ARMs (adjustable rate mortgages) are typically lower than interest rates on fixed-rate mortgages, and loans with a shorter term (15-year, for example) come with a lower interest rate as well. One last thing to consider may be your improving credit record. You may have taken out a higher rate mortgage because of inability to verify income, less-than-perfect credit, or bankruptcy or foreclosure. It was a great idea to get on the home ownership bandwagon and now it makes sense to take advantage of a lower rate. Your Mortgage Consultant can help you find the loan that's best for you! Refinancing to access ready cash The difference between your home's value (what it might sell for) and the balance on your current mortgage is equity you can turn into cash to remodel your home, pay for college, or pay off high-interest debts. Used wisely, refinancing can be a smart way to free up cash and put your home's value to good use.
Refinancing to shorten your mortgage term
The shorter the mortgage term, the better the interest rate and the less interest you pay overall. Provided you can afford the higher monthly payments, refinancing to reduce the term of your loan is generally a smart move. Shortening the term of your mortgage can also enable you to pay off your home before retirement, making it easier to live well on less income. The shorter term allows you to build equity in your home much faster. Refinancing to change how interest is calculated If you plan to move in a few years, switching from a fixed-rate mortgage to an ARM (adjustable rate mortgage) can significantly reduce your monthly payments. Because ARMs carry a lower interest rate during their initial, fixed-rate period, you pay less interest during the first few years of your loan than you would with a fixed-rate mortgage. By the same token, if you plan to stay in your home for longer than the initial fixed-rate period of an ARM, you may want to switch to a fixed-rate mortgage so your monthly payments are predictable.
You've probably heard it often -- another friend or neighbor has refinanced and is enjoying lower monthly mortgage payments. You may have read headlines that talk about mortgage interest rates reaching historical lows. So, you ask, is now the best time to refinance my mortgage? Refinancing is essentially paying off your existing mortgage and taking out a new one. This section discusses the basics of refinancing, such as the reasons for refinancing and the steps involved. It also discusses your financing options. After you understand these basics, your Mortgage Consultant can help you with more information or get the refinancing process started. When does it make sense to refinance? Refinancing can help you lower your monthly payments, withdraw cash via the equity in your home, or switch to a different loan program that better suits your needs. Being clear about your refinancing goals will help you choose the loan program that's right for you. What are your goals for refinancing?
● I want to lower my monthly payments
● I want to access ready cash
● I want to shorten the term of my mortgage
● I want to switch to an ARM or a Fixed Rate Mortgage
Refinancing to lower your monthly payments
Refinancing to lower your monthly payments is easy: you simply switch to a loan with a lower interest rate. How do you know when to refinance? A good rule of thumb is to wait until interest rates drop .75%-1% below your current rate. Another way to lower your monthly payments is to switch to a different type of loan. Interest rates on ARMs (adjustable rate mortgages) are typically lower than interest rates on fixed-rate mortgages, and loans with a shorter term (15-year, for example) come with a lower interest rate as well. One last thing to consider may be your improving credit record. You may have taken out a higher rate mortgage because of inability to verify income, less-than-perfect credit, or bankruptcy or foreclosure. It was a great idea to get on the home ownership bandwagon and now it makes sense to take advantage of a lower rate. Your Mortgage Consultant can help you find the loan that's best for you! Refinancing to access ready cash The difference between your home's value (what it might sell for) and the balance on your current mortgage is equity you can turn into cash to remodel your home, pay for college, or pay off high-interest debts. Used wisely, refinancing can be a smart way to free up cash and put your home's value to good use.
Refinancing to shorten your mortgage term
The shorter the mortgage term, the better the interest rate and the less interest you pay overall. Provided you can afford the higher monthly payments, refinancing to reduce the term of your loan is generally a smart move. Shortening the term of your mortgage can also enable you to pay off your home before retirement, making it easier to live well on less income. The shorter term allows you to build equity in your home much faster. Refinancing to change how interest is calculated If you plan to move in a few years, switching from a fixed-rate mortgage to an ARM (adjustable rate mortgage) can significantly reduce your monthly payments. Because ARMs carry a lower interest rate during their initial, fixed-rate period, you pay less interest during the first few years of your loan than you would with a fixed-rate mortgage. By the same token, if you plan to stay in your home for longer than the initial fixed-rate period of an ARM, you may want to switch to a fixed-rate mortgage so your monthly payments are predictable.
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