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Short Sale, Loan Modification & Foreclosure Solutions
6 Things You Need to Know Before You Apply for a Loan Modification
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By Nadia Kourehdar, Attorney at Law - Monday, March 23, 2015
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Blog Topics If you are at risk of foreclosure, your mortgage lender is going to talk to you about a loan modification.
Bankruptcy (5)
This idea has a lot of appeal to homeowners. If it works, you get to keep your home and make a lower
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payment every month.
Deed in Lieu of Foreclosure (1) Deficiency Balance (1)
You need to know that deciding to apply for a loan modification can create problems down the road.
Foreclosure (60)
Some lenders will not allow you to pursue any other option – such as a short sale – while your
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application for a modification is being reviewed by your bank. Your lender, on the other hand, can
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continue the process of taking away your home while your application is being reviewed.
Loan Modification (29) Mediation (8)
In the state of Washington, the only way to legally put foreclosure on hold for a time is to file for
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mediation.
News (5) Press Releases (2) Real Estate (22)
We’ve found that some of the time a loan modification is NOT the best idea for homeowners.
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Here are 6 things you need to know before you decide to apply
Statistics (6) Stopping Foreclosure (39) Tax Questions (4) Unemployment Forbearance (2) Video (13)
1. Truly beneficial loan modification approvals are rare. Many mortgage lenders follow federal government guidelines (called HAMP, for Home Affordable Modification Program) when considering whether to modify a loan in order for the lender to receive incentive payments from the government.
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The federal guideline is that your loan payment should be less than 33% of your income. The lender’s first option is to adjust the interest rate to lower your payment. The second step is to adjust the term of the loan, so that you pay a smaller amount for a longer period of time. If neither of these gets the payment low enough, the lender would need to forgive a portion of the loan. This sounds great to homeowners who have lost their jobs or other source of income. They apply, thinking the bank will reduce their monthly payment to something more manageable. But banks aren’t required to do any of these things for you. They are obligated to review your application for a loan modification, but they don’t have to accept it. Principal forgiveness, which is the best kind of loan modification, is actually fairly rare. Typically, you'll be given a temporary loan modification with a lower payment, while they determine whether to offer you a permanent loan modification. This process can take up a lot of valuable time. This brings me to my next point . . . 2. Applying for a loan modification doesn’t necessarily stop the foreclosure process. When a representative from your mortgage lender talks to you about applying for a loan modification, that doesn’t mean they aren’t continuing to pursue foreclosure. But it can sound that way to a homeowner. Whether it’s wishful thinking on the part of the borrower or deliberate deception on the part of the lender, people often believe that when they’re in the process of applying for a load modification, their bank isn’t going to foreclose. In fact, most people are under the impression that this "dual-tracking" is prohibited. While it may be in some cases, in our experience, the clock keeps ticking while the loan modification is being reviewed. Worst case? Your lender finally tells you that you haven’t been approved for a loan modification and you immediately learn that a foreclosure auction date is set. Your options have become very limited at this point. 3. Approval may not be the good news you thought it would be. If you get an offer to modify your mortgage loan from your bank, be sure to examine it carefully. Often these agreements start with great terms, but then have a built-in balloon payment due for a huge amount – sometimes in just 6 or 12 months you’d have a payment of $10,000 to make! That is not long-term relief. It only delays the inevitable. (And in the meantime, the bank continues to receive payments from you that you can never recover.) We’ve also seen lenders extend terms out to 55 or 60 years. The payments may have gone down, but you’ll be paying your mortgage forever. That’s not a viable solution for anyone who wants to retire someday. Keep in mind that just because you can (in theory) scrape together enough to make your mortgage payment, doesn’t mean this is the best solution for you. Freeing yourself from that debt – even if it means moving to another home – may be a better way to live. Consider what it means to have half your income gone before you even see it. What would happen if you had an emergency to deal with? What happens if you need to make some repairs to your home? What about retirement savings? What about just taking a vacation some day? The hard truth is if you can’t afford your mortgage now, you probably can’t afford a loan modification. You may be delaying foreclosure rather than preventing it. And then you’re left with nothing – not even your credit rating. 4. Loan modification usually requires a three-month trial – with another review at the end. Even if you follow through with everything you promised on this three-month trial, the bank can still deny you a permanent modification! They will go ahead and foreclose after you have made thousands of dollars in payments in good faith, because you mistakenly believed you had a binding agreement. This seems incredibly unfair, but it’s totally legal. 5. Lender reps may be required talk to you about loan modification options – even if they know it’s not going to work out. This sounds a little crazy. But, according to HAMP rules, mortgage lenders must actively solicit borrowers to participate in HAMP before referring a loan to foreclosure or scheduling a foreclosure sale. Just because your rep calls you and encourages you to apply for a loan modification, doesn’t mean there’s any reason to believe a loan modification is going to be approved – or that it’s a good idea for you. 6. The loan modification process is time-consuming. You will be required to provide a lot of documentation – even more than you would for obtaining a mortgage in the first place. You have to account for all sources of income and all your expenses. This is a problem if you take two months to get all your documents together while your lender is continuing the foreclosure process. If you aren’t pursuing other options yourself, you can easily run out of time and lose your home if your application is denied. (If you're considering doing your own loan modification, this free guide will show you how to submit your loan modification documents the right way the first time. Download your copy here.)
When does a loan modification make sense for a homeowner? You may be a good candidate for a loan modification if you experienced a temporary drop in income that made it impossible for you to keep up with your mortgage payments for a few months. If you have been re-employed and now have the income to make your mortgage payments, a loan modification can help you get back on track with your lender. When it comes down to making a choice to try for a loan modification, remember the old adage: If it seems too good to be true, it probably is. While anything can happen, it’s not realistic to expect a lender to forgive your debt – after all, they are in business to make money. Too many times we’ve seen homeowners pursue loan modification because they want so much to keep their homes – but, unfortunately, they end up not only in foreclosure but in a far worse financial position than where they started. Our recommendation is that you get good counsel before you decide to go down this path. We would be happy to hear your story and talk with you about the pros and cons of every option you have, so you can make an informed decision. This consultation is free, with no further obligation.
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Nadia Kourehdar, Attorney at Law Nadia Kourehdar is the Managing Attorney at Ark Law Group. She leads a team and a system at Ark Law Group that has helped to secure over 1,550 short sale approval letters and eliminated over $153 million in debt for their clients. Her area of focus is debt relief, which includes debt settlement, short sale negotiations, loan modifications and mediations. Nadia is tireless in her pursuit of achieving total debt relief and a fresh start for her clients.
Comments (100) Add Your Comment
Anita December 7, 2015 5:40:19 AM GMT+07:00
If I already applied for a loan modification, can I change my mind and cancel it? Reply to Anita
Lambros Politis December 7, 2015 5:40:43 AM GMT+07:00
Yes. Lenders typically make homeowners choose whether they want to apply for a retention option such as a loan modification or a liquidation options such as a short sale. Many lenders will refuse to review homeowners for all available options at the same time. If you are facing foreclosure and choose a retention option, you may run out of time to then pursue a liquidation option should retention fail. At any point, you can notify your lender that you want to switch out of your loan modification application and into short sale review. Liquidation options often require different documents. I would recommend consulting with a professional about how to make a seamless transition between reviews. Reply to Lambros Politis
Shauna Tryon December 9, 2015 7:36:15 AM GMT+07:00
If you do get an approval and its been about a year of good payments can you refinance or try to sell and buy another home? I have a client who is in a loan mod with her mortgage company but says her credit has never been better. Reply to Shauna Tryon
Lambros Politis December 9, 2015 7:37:45 AM GMT+07:00
Hi Shauna, great question. If a borrower's credit score has been negatively impacted in light of a mortgage default (with an eye towards qualifying for a loan modification), and assuming the home is underwater, then a refi probably isn't in the cards. Quite frankly, even with stellar credit, I suspect that she would be hard-pressed to find a lender willing to do a conventional refi on an upside down house. Reply to Lambros Politis
Anonymous December 10, 2015 3:42:39 AM GMT+07:00
Can I withdraw my current RMA and resubmit a new one? I was unaware that 125% is added to SSDI. I included my son's benefit and my SSDI. I cannot afford the mod that Chase has offered. I asked the attorney to revise my income and she said Chase said "no". Any suggestions? Reply to Anonymous
Lambros Politis December 10, 2015 4:03:02 AM GMT+07:00
Yes! The term you need to use to get them to consider a revised RMA is "changed circumstances." Complete a new RMA with the correct information and then send it with a letter at the front of the package that is labeled "CHANGED CIRCUMSTANCES" in all caps. Then, explain (using bullet points so it's easy) the circumstances that require you to re-submit your income. The legal term for this is "including non-household income." Include that phrase in your letter. Then, call daily to tell the lender you need to be re-reviewed. Chase may say no! They may say no a few times per their procedure; however, they are obligated to review you with the correct income reported so keep trying! Eventually, they will have to review you. Lastly - are you eligible for mediation? Review this option with an attorney. Reply to Lambros Politis
Adrienne December 10, 2015 5:46:38 AM GMT+07:00
Hello Sir, I own a home in Philadelphia for the last 8 years. I currently do not live there and my current tenants are moving. I have excellent credit but, I can no longer afford the mortgage unless I rent or sell. What options do I have? Should I apply for a refiance, modification or short sale? Reply to Adrienne
Lambros Politis December 10, 2015 5:50:45 AM GMT+07:00
Great question, Adrienne. As a preliminary matter, I am not a licensed attorney in the state of Pennsylvania, so you'll want to make sure to speak with a lawyer licensed in that jurisdiction. Generally speaking, however, when a borrower can no longer afford the mortgage payments on a rental or investment property, he or she only has a handful of options available to them. If you think that you can get a new tenant in the property with sufficient rent to cover the mortgage along with maintenance costs, thus generating a positive cash flow, this might be a viable option. If sticking a new tenant in the home would result in a negative cash flow, then this would result in a poor financial decision and most certainly would not be prudent. If you have equity in the home, then you won't have to sell the property as a short sale and you can sell the home as an equity deal. If the home is upside down or underwater (meaning that you owe more than it's worth) then you would have to get approval from the lender in a short sale. A refinance might be possible if you are credit-worthy and the property has sufficient equity--you would likely not qualify for a refi if you're underwater. A loan modification might be an option if you are able to demonstrate a hardship and believe that you can get your interest rate low enough to generate a positive cash flow from rents. Unfortunately, to qualify for a loan modification, you may need to default on your loan. I hope this helps! Reply to Lambros Politis
Joseph Eagan December 30, 2015 6:15:49 PM GMT+07:00
I'm so happy to see the diversity of blogs mentioned. They've been around for quite some time. It's great to see some kind of acknowledgement. Yes, i agree loan modification process is timeconsuming. You will be required to provide a lot of documentation – even more than you would for obtaining a mortgage in the first place. You have to account for all sources of income and all your expenses. This is a problem if you take two months to get all your documents together while your lender is continuing the foreclosure process. If you aren’t pursuing other options yourself, you can easily run out of time and lose your home if your application is denied. Reply to Joseph Eagan
Lambros Politis May 4, 2016 12:42:07 AM GMT+07:00
Joseph, thank you so much for your thoughtful contribution. You summed it up perfectly--I honestly don't have much to add. The only thing I would say is that confirming receipt of the documents is one of the most critical elements in facilitating the loan modification negotiations. We find that the biggest hurdle borrowers are faced with when submitting their docs is the lender's outright refusal to acknowledge receipt of documents that have already been submitted numerous times. Working with a professional law group that has successfully negotiating hundreds of loan modifications can help get around this artificial roadblock that lenders throw in your way. Reply to Lambros Politis
Stephanie January 27, 2016 1:02:04 AM GMT+07:00
We were approved for a loan modification but upon further review of the documentation it would be stupid to accept it. We have always paid our loan on time and are not behind but a friend suggest we apply for a loan mod to lower our interest rate. We dont have 85% equity yet to do a traditional refinance and our current rate is 6.5%. The modification they offered only lowers the interest rate to 5.875% and the maturity stays the same but they used 40 years to do the amortization schedule so we end up with a HUGE balloon payment. Essentially it would be stupid for me to accept it. Now however we are "behind" on the real loan since I was making the lessor payments for the loan mod. I want to call the bank and get back on track but I want to know what my rights are as well? as I mentioned we have NEVER missed a payment except for the last two months we paid the lessor amount. Thanks! Reply to Stephanie
Lambros Politis April 28, 2016 1:04:54 AM GMT+07:00
Hi Stephanie, if you are not content with the terms of your loan modification and wish to "get back on track" you can always reinstate the original loan by paying off the arrears and bringing the account current. Hope this helps. Reply to Lambros Politis
Karen M. February 22, 2016 9:45:04 PM GMT+07:00
Hi , I was approved for a loan mod. In 2014. I fell behind in my mortgage agsin due to job loss but, regained employment with a staff g agency working full time. With hopes of becoming perm. I applied for a loan mid. In Oct. 2015 but it was denied. Iam now applying again. My income increased due to me getting renters. The mortgage is affordable howevet, I have fair too behind to catch up. And too much money I would have to put down if I did a repayment. Can you give me guidance and your opinion Karen Reply to Karen M.
Lambros Politis April 28, 2016 12:42:46 AM GMT+07:00
Hi Karen, great question, thank you for contributing to our blogs. Please do not hesitate to give us a call for a free consultation to go over your loan modification options. There are lot of moving parts there and too many variables to provide any sort of meaningful guidance in a blog post. That said, you'll want to be sure to engage the lender to explore any work-out options that may be available to you; whether it be some sort of a repayment plan, an in-house modification, or a government backed loan mod program to help you save your home. Reply to Lambros Politis
daniel May 25, 2016 6:35:57 AM GMT+07:00
I have my dream home that was built for us 2 years ago. Unfortunately i lost my job in feb 2015. we have been struggling to make payment ever since. In feb of this year my wife also lost her job and has not been able to find employment. So long/short we are now 4 months behind and pending foreclosure. I have been working with Keep your home california for aid and after a 3 month process i was declined. now my lender is saying they are going to work on a modification for me. Reading your advise above i am unsure if i should sell and walk away or stay in my dream home. I owe 309K appraised value 345K so i can get out, but i dont want to go. Would you reccomend selling and getting some cash or modifying and staying. Other info i am 35 and have 3 kids in the desired school for us. if i sell i will not be able to rebuy with current income and FICO... i would have to rent. to rent in this area i would be paying (what i assume) what would be close to a modification price... i dont know what to do? Reply to daniel
Lambros Politis June 8, 2016 3:17:48 AM GMT+07:00
Greetings Daniel, and thank you for your heartfelt contribution. This is just as much an emotional decision as it is a financial one, so deciding on a course of action will present some pretty unique challenges for you and your family. With that said, however, you do have some favorable options available to you in light of the circumstances. First and foremost, it is important to note that you have the luxury of equity. Many folks in default have the added burden of being upside down, thus making it much more difficult to get out from underneath a property that no longer works for them. Because you have equity (even a little equity is enough), should you find that home retention options just aren't feasible--for whatever reason--you can sell your home in a traditional sale without having to go through the short sale approval process. In the alternative, if you are able to negotiate favorable loan modification terms with your lender, then home retention may be your best bet. Oftentimes, within the context of a loan modification, the lender will extend the maturity date of the loan and reduce the interest rate with an eye towards lowering the monthly mortgage payment. If the reduced monthly payment is in line with your finances and you can afford it comfortably, then a loan modification would likely be the way to go. Remember though, typically the lender will tack the arrears balance onto the unpaid principal balance, resulting in larger sum owing to the bank. If you're okay with new, potentially larger loan balance, from a financial perspective, then keeping your dream home will satisfy both the head and heart. Moreover, it is quite possible that under a loan mod, your new monthly payment could be lower than renting a comparable home in the area--also a smart move financially. If you have any additional questions, don't hesitate to reach out and we can further explore your options during a free attorney consultation. Best of luck! Reply to Lambros Politis
Rachel Bailey July 22, 2016 11:47:27 PM GMT+07:00
I just entered into a loan modification to reduce payment due to divorce and employment hardship. I am currently 1 month behind on mortgage and already they are talking of forclosure. I asked to make monthly additional payments to allow me time to catch up but was told no partial payments will be accepted. What can I do to ensure I am not forclosed? Reply to Rachel Bailey
Lambros Politis July 27, 2016 5:09:03 AM GMT+07:00
Hi Rachel, thank you for your contribution! Did you make it through the trial loan modification period? Or have you already obtained a permanent loan modification at this time? If you miss a mortgage payment, either during the trial loan mod period or after a permanent loan modification has been granted, the bank will re-initiate the foreclosure process. You could reinstate the loan, which means paying the entire amount in arrears (past-due amount) to bring the account current and get you out of foreclosure. If reinstatement is not possible because you are unable to come up with the funds, you may be able to negotiate some sort of a repayment plan with the lender to get caught up. It sounds like you may have already tried this but the lender was not receptive to the idea. If reinstatement is not financially feasible and the bank simply refuses to work with you on a repayment plan or subsequent loan mod, then filing a bankruptcy under a Ch. 13 might be a good option to save your home. Under Ch. 13 bankruptcy, you are afforded the opportunity to restructure and re-organize your debt such that you can get caught up on your arrears balance over a specified period of time (3-5 year). Keep in mind, however, that during this repayment plan period you will also be responsible for your regular mortgage payment. I hope this helps! Reply to Lambros Politis
John Chrapkowski August 1, 2016 11:09:57 AM GMT+07:00
What are my chances of my lender doing a loan mod if I have not ever been late (I'm currently up to date and never been late for a mortgage payment after 10 years into my loan. My interest rate is ridiculous 8.5%! I can't refi because my bank never sold to Freddie or Fannie and I don't have an FHA loan but rather conventional. I have good credit ~700 Reply to John Chrapkowski
Lambros Politis August 5, 2016 1:29:37 AM GMT+07:00
Hi John, great question, but not a very simple one to answer. Intentionally defaulting on your mortgage debt can lead to some very grave consequences as it relates to your home--namely foreclosure. I don't know too many attorneys out there who would advise homeowners to intentionally default on their mortgage only to expose them to potential foreclosure liability. That said, many of the homeowners I speak with already find themselves in default by they time they've reached out to me for help, so the question of whether or not to default becomes moot. The bottom line is that you can, in fact, be current on your mortgage payments and still qualify for many of the loan modification programs out there. Some modification programs only require that the borrower demonstrate that he or she is "in danger of falling behind on their payments", but don’t have to actually be in default in order to qualify for the modification. For example, under HAMP, the servicing guidelines provide that you need to show that you are at risk of "imminent default" on your mortgage. While that may sound promising for borrowers who wish to preserve their credit or avoid tripping the foreclosure wire by staying current, we have found that--practically speaking--borrowers stand a better chance at getting a modification if they are already in default. The ugly truth of the matter is that lenders do not have much of an incentive to work with homeowners if they are current on their mortgage. (Sometimes it's true what they say, no good deed goes unpunished). The analogy I use is simple but I think it gets the point across: In this scenario, I am a borrower and you are my lender. I come to you, and with my left hand I present an offer to lower my interest rate on my loan. But with my right hand I keep paying you my monthly mortgage payment at a higher interest rate--month in, month out, on time, every time. What is your incentive to modify my loan and give me more favorable terms? There isn't much, really. When a loan is in default, however, the mortgage becomes a non-performing asset, meaning that the lender is no longer making any money off of your loan. Now the lender will be much more inclined to entertain any offers/options that will result in the mortgage once again becoming a "performing asset", including granting you a loan modification. I hope this helps. Don't hesitate to reach out with any follow-up questions. Reply to Lambros Politis
LINDA LEVINE August 15, 2016 5:39:24 PM GMT+07:00
I have a balance of 535 thousand owed to my home. 300-350 thousand equity but IRS wants 150 grand if I sell it. I haven't paid in 2 years mortgage trying to modify with 4 attorneys and no luck...they are offering 2700 a month (plus 725.00 payment for 21 months ) and the interest rate is 5.2%. Do you think I could do better with interest rate ? I have bad credit already from 16 year divorce and no job for almost 3 years now my income is steady but not high. Please give me some advise about mods....I bought the house in 2001 but it was sold to Nationstar in 2009. Thank you. Reply to LINDA LEVINE
Lambros Politis August 31, 2016 5:15:13 AM GMT+07:00
Hi Linda, thank you for your contribution, great question. If I am understanding the fact pattern correctly, this offer was presented to you in the form of a loan modification? Did the lender extend the maturity date of the loan? Did anything else change aside from the additional monthly payment of $725 for 21 months or are the terms identical to the original loan? If the terms are identical to your previous loan, then the additional $725/mo. for 21 months would fall more under the category of a repayment plan as opposed to a loan mod. It is certainly possible that this is the best offer the lender was wiling to present to you in light of its NPV analysis. That said, the lender could very well have awarded you more favorable terms in response to more zealous, robust advocacy--it's hard to know for sure, there are just too many moving parts. In order to award a borrower a loan modification, the loan must make financial sense for the lender. The standard of review is not what's best for you, the borrower, but what's best for the lender in terms of dollars and cents. The NPV Test (or net present value analysis) is a formula banks use to make financial decisions regarding non-performing loans. In short, the lender discounts all of the future payments to be made under a proposed loan mod term and compares them with the alternative--namely, foreclosure. In theory, the lender should select the more profitable course of action. Sounds simple enough, right? Not exactly. The NPV test also includes other factors which are a bit more amorphous and speculative. For example, the NPV includes an estimate for the probability that the borrower will default again after being awarded a loan modification. (Don't ask me how lenders arrive at the probability for "re-default" - lenders play it extremely close to the chest as it relates to how they arrive at a conclusion regarding anticipated re-default rate). Unfortunately, I do not have a complete enough picture with all of the requisite data points to help you determine whether or not your offer was a "good deal" or not. Ultimately, a loan modification or repayment plan provides a good outcome for the borrower if he or she can comfortably afford the new payment and save the home from foreclosure. I hope this helps, Linda. Reply to Lambros Politis
Marisa Kale August 17, 2016 10:37:55 AM GMT+07:00
Hello..we filed bankruptcy 2014 and our house was NOT reaffirmed... We have fallen 4 months behind due to my husbands illness..... Times are better now and chase says we are approved for HAMP modification.... It will lower our payment more affordable...we do have some equity in the house as well... We don't want to live here forever but it will still be cheaper then renting...my question is will this reaffirm the loan? The trial payment needs paid October 1st...and no earlier it says..... In the meantime could they start forecloser? Also they did put in the letter that they will need to be first lien on the house....does that mean reaffirmation? Reply to Marisa Kale
Lambros Politis August 18, 2016 3:47:40 AM GMT+07:00
Hi Marisa, that is an excellent question, thank you for your contribution! The answer is no, by obtaining a loan modification, you are not reaffirming any mortgage debt that was discharged pursuant to a bankruptcy. In order to reaffirm your mortgage debt, you must first request a reaffirmation agreement from the lender. You and your attorney must then sign the reaffirmation agreement and submit it to the court. Most attorneys I know who represent debtors within the context of a bankruptcy would be very hard-pressed to to sign off on a reaffirmation agreement following a discharge. The takeaway here is that you cannot mistakenly stumble into a reaffirmation of your debt - reaffirmation requires that you and your attorney take active steps to reaffirm. Hope this helps! Reply to Lambros Politis
Cecil Murray September 4, 2016 12:54:56 AM GMT+07:00
I have a second mortgage that has ballooned and haven't been able to make a payment since April. I am still paying and am current on the first mortgage which is held by another lender/servicer. The value of my home barely $180K but the total of both mortgages is around $223k. The first mortgage is around $178k thus there is no real equity to cover the $43k second.. I have been waiting for months on word of a loan modification from the second mortgager all they do is keep asking me for more documentation and running down my credit score.. They have not begun any type of foreclosure nor modified the loan..>What gives? Reply to Cecil Murray
Lambros Politis September 8, 2016 7:04:15 AM GMT+07:00
This is a fantastic question and a great fact pattern to highlight a very important concept in the world of foreclosures and debt settlement - 2nd mortgage foreclosures. Mind you, what I'm about to share only applies to Washington state; please seek counsel from a licensed attorney in your home state for laws unique to your jurisdiction. In Washington state, a foreclosing lien holder may NOT pursue a borrower for a deficiency balance following a non-judicial sale. This is the case even if the foreclosing lien holder is in second position. In Washington, because of the lien priority status rules, the first mortgage holder is paid in its ENTIRETY before a junior lien holder sees any of the proceeds from the trustee sale. This is the case even if the 2nd lien holder initiated the foreclosure action. Thus, if there is barely enough equity in the home to satisfy the 1st mortgage, by foreclosing, the 2nd will walk away with nothing in light of the rule preventing a foreclosing party from seeking a deficiency against the borrower. If the lien holder in second position is aware that there isn't sufficient equity in the home to satisfy the loan balance, they may hold off on initiating a foreclosure action. (Mind you this only applies to non-judicial foreclosures; judicial foreclosures are a different animal altogether and I will save that discussion for another blog post. In short, following a judicial foreclosure, the lien holder retains the right to pursue the borrower for a deficiency balance). The analogy I like to use is the “champagne glass pyramid” example. At every fancy gala event that I've had the pleasure of attending (just the one), there is always a pyramid of champagne glasses--a single glass sits atop the pyramid and represents the first lien holder, the second, third, fourth and fifth tiers of flutes represent the junior liens. Before the second tier of glasses gets any liquid at all, the first glass must be completely full, and then--and only then--does the second level get any of the overflow champagne, and so on and so forth. If EVERY glass in the pyramid is full (i.e. every lien holder is completely satisfied), and there is anything left in the champagne BOTTLE (surplus funds), then the borrower gets the excess champagne (sale proceeds). If there isn't enough champagne in the bottle to fill up the very first glass, then the other glasses remain dry. Sad. Moreover, it sounds to me like the lender is throwing artificial obstacles in your way to discourage you from pursuing a loan modification. Working with an experienced negotiator who understands the law and knows all of the appropriate channels of communication will serve to optimize your chances of success. Obtaining a loan modification that provides you with meaningful relief and enables you to save the home is our objective - if you're a WA state resident, give me a call for a free consultation. Hope this helps! Reply to Lambros Politis
Brad Denkhaus September 28, 2016 4:49:04 AM GMT+07:00
Hi Lambros, Can you share any statistics on the percentage of loan modification applications that are approved, or conversely, denied? Thanks! Reply to Brad Denkhaus
Nadia Kourehdar October 25, 2016 2:58:40 AM GMT+07:00
Hi Brad, Great question! There are many different modification programs people can apply for. Some are run through the government and some are run directly through the individual servicers like Wells Fargo, Chase, Bank of America, Rushmore, Ditech etc. The servicer-run programs are typcially called in-house loan modifications and the statistics surrounding these approval rates are hard to find as lenders are responsible themselves for publishing accurate data themselves. They often don't do this. There are also government-backed modification programs like HAMP Tier 1, HAMP Tier 2, the FHA Partial Claim Program, VA and USDA Forbearance/modification plans etc. The most recent statistics for HAMP approvals is between 30% - 45% Basically, the baseline HAMP statistic says that about a third of homeowners who apply for a modification through HAMP end up approved. With that said, this is not a good statistic to rely on because it doesn't take into account approvals based on appeals. It also doesn't differentiate between HAMP Tier 1 and HAMP Tier 2. The HAMP Appeal Process is a huge part of the loan modification approval process, as lenders often mess up or miss a piece of data from the outset. Many homeowners receive a quick, brief and disorganized review at the outset leading them to a denial. Then, they get approved during the appeal phase. The bottom line is - the modification process is so individualized and dependent on a borrower presenting an accurate and detailed view of their financial situation, that the approval statistics simply aren't meaningful at this time. Reply to Nadia Kourehdar
Laci September 28, 2016 6:38:43 AM GMT+07:00
Same thing happened to my parents and they just denied them and foreclosed anyways.. All while making them think they were in the process of receiving a loan modification.. Sad that hard working americans are having their homes stolen by these big banks still after all of these years that the problem could have been corrected. Reply to Laci
Nadia Kourehdar October 26, 2016 2:27:56 AM GMT+07:00
Hi Laci, Sorry to hear about your parents' tough situation. They definitely aren't alone in what happened to them. You're right - it is sad. There is definitely a power imbalance between banks and regular people that needs to be bridged. We're working on it one day at a time! Reply to Nadia Kourehdar
Jeanine T September 30, 2016 12:57:23 AM GMT+07:00
We bought our house 10 years ago. The loan we got was an interest only loan for 10 years with an 8% interest rate. The house is underwater by about $100k. In November the loan adjusts to interest + principal. Our monthly payment increases by $1,100. We intend to submit an application for a loan modification based on the increased payment being a hardship. Essentially what we are hoping for is a reduced interest rate. We are not eligible to refinance as the loan is not backed by Fannie or Freddie. This seems like our last resort before considering a short sale. Both my husband and I work, but he is the only one on the mortgage. We have never missed a payment on the mortgage, but the increased monthly amount is going to be very difficult to manage. We intend to apply for the loan mod taking into account his income and his debts. Please give us some advice. We really want to keep our home! Reply to Jeanine T
Nadia Kourehdar October 26, 2016 4:57:09 AM GMT+07:00
Hi Jeanine, Thanks for reaching out with your situation. Lots of homeowners signed interest only loans some years ago and are facing similar situations. You're definitely not alone. If you or the property is in Washington or Arizona, please call us so we can help you further. Reply to Nadia Kourehdar
Brenda Iverson October 10, 2016 9:10:36 AM GMT+07:00
I was offered a reduction in my interest rate from 8% to 3% for 20 yrs . They said my 689 includes taxes and insurance (was 1260) and my 144 K balance owing will be completely paid off during that 20 years but when the loan matures at 20 years they willI tack on 87K additional balloon payment, and I would re-fi from another lender. So basically are they just adding 87K to my balance for the lower monthly payment? Reply to Brenda Iverson
Nadia Kourehdar October 26, 2016 2:40:53 AM GMT+07:00
Hi Brenda, I would have to receive more information to give the best advice - also - please know that the laws change depending on what State you live in so please use the below only as general advice. Balloon Payments are common ways that lenders make loan modifications profitable. In order to reduce your interest rate and payment, it is possible that they took some (or all) of your back dues, late fees etc. and lumped it together into a Balloon Payment due at the maturity of the loan. You likely received an in-house modification not a HAMP or HARP refinance (I'm guessing). Most modifications that have big balloon payments are part of a lender's in-house program. It is possible that you will be able to refinance when the payment comes due but you'll really want to discuss this option before you sign. Talk to your lender to see if there are any other modification programs they didn't run you through before you commit. Ask specifically about HAMP. Reply to Nadia Kourehdar
Jon C. October 27, 2016 9:07:47 AM GMT+07:00
My underwriter called today to tell me what supporting documentation I needed to submit to them. The reason I am applying for a mod is because there was an unexpected ,and likely "longer term" family illness with our daughter and my wife had to leave her employment to care for her. The underwriter is claiming that since my wife is not a co-borrower that that does not qualify as a reason for hardship for me. Does that sound legit? How could 1/2 of my household income being lost not qualify as a financial hardship for me even if she is not a co-borrower? Reply to Jon C.
Nadia Kourehdar October 28, 2016 2:25:14 AM GMT+07:00
Hi Jon, Thanks for sending in your question! This is one way that lenders try to disqualify homeowners from participation in the a loan modification. Their argument is that, since your wife wasn't an original borrower, her expenses shouldn't be counted when explaining your hardship. As you know, that's ridiculous! Incurring household expenses at an increased level due to illness of your spouse is a very legitimate hardship. Likely, the problem comes down to the way your hardship letter was worded. My recommendation is to send back a revised hardship letter with as much detailed numbers as possible. Instead of explaining that that there has been illness - attach numbers to the information. Include actual expenses and show the lender, through a simple math equation what you are bringing in and what is going out due to the hardship. Please know that this advice is simply general advice based on your comment. If you live outside WA, the laws may be different. Please call us for more information: 800-603-3525. Reply to Nadia Kourehdar
Pina Mont November 17, 2016 10:47:06 AM GMT+07:00
I have a VA loan, my husband passed away and he leaves me a life insurance policy, can I apply for a home affordable loan? Reply to Pina Mont
Nadia Kourehdar December 1, 2016 3:41:20 AM GMT+07:00
Hi Pina - Thanks for sending in your question. This is only general advice below: Lenders want to see that there is a steady stream of income coming into the household to show that making modified payments is a viable solution long-term. I would want more information about how the life insurance money comes to you but you will have a shot at approval if you can show that the income stream is reliable, permanent and enough to pay your expense and a modified mortgage payment. Reply to Nadia Kourehdar
Linda Ross December 26, 2016 12:30:28 AM GMT+07:00
I had my home modify in 2013 I been paying small payments .I'm on SSD I'm a widow I pay on time every month never late..Well I have a son he got in to truble and I was thinking can i take out a second mortgage or not..I only own 3thouson on my home...My credit is bad other wise. Reply to Linda Ross
Nadia Kourehdar January 12, 2017 11:13:43 PM GMT+07:00
Hi Linda - Thanks for sending in your question! This is more a question for an MLO or someone who refinances mortgages. Meet with someone who specializes in lending and they will be able to qualify you further. Reply to Nadia Kourehdar
John S. November 28, 2016 9:26:13 AM GMT+07:00
We were one of those Florida homes that got abandoned for robo signing misconduct 7 years ago. Now the bank is foreclosing and we did manage to get a Mortagage modification, the first payment due just before the sale date. I noticed that the bank is tacking over $90,000 in delinquent interest on to the loan. Statute of limitations is 5 years. I that within the bank's rights. Is this first effort at securing a HAMP modification our best option? Reply to John S.
Nadia Kourehdar January 12, 2017 11:11:17 PM GMT+07:00
Hi John - Please know we are not licensed to practice law in Florida so this is only general advice. You will want an attorney to look over the deal offered to you by the bank to see how they're justifying tacking on such a high number to the balance. You are always entitled to request a full accounting, ledger, itemization of late fees, and additional fees attached to your loan. Once you have this, take it to an attorney to have them review to make sure the bank didn't add anything they weren't supposed to add. Reply to Nadia Kourehdar
Nikki Hill December 29, 2016 4:57:47 AM GMT+07:00
Is there a limit on the amount of time you can apply? Reply to Nikki Hill
Nadia Kourehdar January 12, 2017 11:17:35 PM GMT+07:00
Hi Nikki - Great question! Depending on your investor/lender - there may be a limit. Some FHA loans only allow you to apply for a modification once every 20 - 24 month period and some people approved for HAMP can't reapply within a 24 month period. With that said, there are ways around these requirements. You stand a good chance at being re-approved if you can show a change in circumstances since your last review. Things like new income, new contributors, increase in expenses etc. help encourage lenders to re-review. It is always worth presenting the information and asking a lender to review you even if they're telling you they can't. They do posses the authority to make exceptions. Please know that this is simply general advice as laws within your State may affect this - reach our directly for more information: 800-603-3525.3 Reply to Nadia Kourehdar
Beverly Jones January 1, 2017 5:16:40 AM GMT+07:00
Both my first and second are with Bank of America and I have a third that I received via Maryland's Emergency Mortgage Assistance Program that is forgiven within 5 years, year 5 is within reach! However I have received a letter from Bank of America that my 2nd will be going to auction in January 2017 and I am currently 2 payments behind on my first. I originally applied for a modification however, it was declined as at the time I was still in the EMA program. I have attempted several times, however never supplied the additional documents needed after the first round of documentation was submitted. I just read the response about the a foreclosure on the 2nd not superseding the 1st and wanted to find out if that is the same for the state of MD. The house is one that my former husband and I built and after he passed there wasn't enough money to pay if off. I am so stressed right now I can't see straight and really don't know what to do. Please help. Reply to Beverly Jones
Nadia Kourehdar January 13, 2017 1:15:50 AM GMT+07:00
Hi Beverly - Thanks for sending in your note. With foreclosure coming up, it sounds like you need to do everything possible to complete that loan modification application. I know it's tough with document collection but it sounds like that's where you're getting stuck. If you'd like to call for more information, please do: 800-603-3525. Reply to Nadia Kourehdar
Ernest Paz January 6, 2017 5:11:05 PM GMT+07:00
Hello, I was approved for a modification loan and went through a trial period and finally entered into a permanent modification with the lender. The agreement was that they reduced my balance (not my interest rate) and I had to pay back the reduction at the end of the term. I sold my home last July and HUD was collecting the reduction in principal that had been applied to my loan when I was approved. At time of closing, the mortgage payoff included the balance owed plus the subordinate deed of trust balance and the tile company paid out those funds to the lender. A month ago, I get a letter from HUD stating that they have yet to receive the subordinate deed of trust money. I called my previous lender and they said that money was for their expenses and not for HUD. But the letter that HUD sent me with the balance owed is the same amount that my lender collected from me at closing. Does HAMP need to receive this money or does my lender stay with it as how they said for their expenses? Reply to Ernest Paz
Nadia Kourehdar January 12, 2017 11:08:46 PM GMT+07:00
Hi Ernest - Thanks for sending in your question! It sounds like you have a lot going on with your case. When HUD modifies a loan, they enter what's called a Partial Claim. This often shows up in second position on your Title Report, similar to a second mortgage. It sounds like that may be what you had. When the home is sold, both your original mortgage and the Partial Claim likely needed to be paid. Escrow should have paid all liens on Title. Without a closer look at the closing docs, it's difficult for me to say what happened. My recommendation would be to take your question to Escrow. If you're in WA, AZ, or NJ - we may be able to review your documents and help you further. Feel free to call: 800-603-3525. Reply to Nadia Kourehdar
George Hill January 12, 2017 5:52:05 AM GMT+07:00
I am going to attempt to save my house, but unsure of a direction or if I'm just wasting my time. I completed my divorce in 2012, the agreement was my ex had 1st attempts in getting a loan and purchasing the house, if she was not able to or didn't want to I had 2nd attempt to retrieve the house, if neither could or wanted to a short sale was the third option. Which leads me to now,,, my ex still hasn't attempted to obtain a loan, instead she has been renting it out to unfavorable s, she petitioned the court (in 2016, 4 years later) to stop my attempt to retrieve the house or short sale it, I petitioned to allow me in to retrieve the property or short sale it. which leads me to wondering if I attempt to modify the loan, will I end up being foreclosed on as soon as I move back in? the bank offered me to "resume" where I left off on the loan, dropping the penalties, which makes the house more affordable, and income wasn't the issue, the divorce and lack of the courts to enforce the orders in a timely manner. any suggestions as to direction? Reply to George Hill
Nadia Kourehdar January 12, 2017 6:05:27 AM GMT+07:00
Hi George - Thanks for sending in your question! Please know that depending on what State you're in, things are different and the below should only be construed as general advice. If you have the option to try to modify your loan now to stay in the home and the divorce decree allows for this - this won't harm you. It definitely won't incentivize the lender to move forward with foreclosure - it may slow down the foreclosure timeline a bit. If the bank is engaging with you and making offers to you, that likely means they want to work with you. I would encourage you to get all offers from your lender in writing and review with your divorce attorney to make sure they match what is ordered in the decree. If you'd like to speak in more detail and are in a State that we're licensed to practice in - give us a call! 800-603-3525. Reply to Nadia Kourehdar
Allan Dela Cruz January 12, 2017 1:48:23 PM GMT+07:00
My situation is a little different so please bare with me. I bought the house with my ex-wife and mother back in 2005. I didn't have good credit back then so I was left out of the mortgage with just my mom and my ex-wife on it in order for us to get a good interest rate. So we got a divorce and I ended up with the house back in 2010. This was during the housing meltdown and I didn't know whether I wanted to keep it or not. 6 years later they started the foreclosure process. I've tried modifying the loan now since I figured I want to keep it but the loan services won't talk to me since I'm not in the mortgage. I'm the only one on the deed since my mother and ex- wife both signed a quit claim deed. I was getting ready to give up on the house but a company or program called keep your home called and said they might be able to help. So they said that have worked with Rushmore mortgage before and they said they might be able to talk to them and have them get me in a program where they will have my missed payment for the last five years along with the interest on it in a balloon payment later on. My question is is this legit? Could these guys really talk to the services and have me continue to make payment until I can refinance it and put it only own name. Thanks. Reply to Allan Dela Cruz
Nadia Kourehdar January 12, 2017 10:59:58 PM GMT+07:00
Hi Allan - Thanks for your question! I would be a little bit concerned about any company who calls you promising you anything, especially if you're not on the original loan. There are several companies out there who try to take advantage of distressed homeowners. With that said, there is a process out there that could help you! It's called Assumption. Essentially, you need to engage Rushmore and let them know that you want to be reviewed for two things simultaneously - Assumption and Loan Modification. Oftentimes, if you don't expressly request to be reviewed for an Assumption, the bank won't know to open that application process. It is a bit longer and more complicated than standard modification processes. If you are approved to assume the loan and receive approval on the loan modification, Rushmore will then enter a new loan solely in your name and will remove the other two parties from the loan. It is possible this is what the company was offering you - I would be sure to ask them specific questions about how they think the process will go to make sure they're familiar with both Assumption and Loan Mods. If they promise you anything or tell you anything is guaranteed, be careful. Please know that the above advice is general advice as States' laws vary - please reach out directly if you have any more questions! 800-603-3525. Reply to Nadia Kourehdar
Mia Getz January 15, 2017 4:03:17 AM GMT+07:00
I am currently in foreclosure. The lender accelerated the debt over 6 yrs ago with their first suit which they withdrew on their own. I was unaware of the 2nd filed suit because I was not properly served/did not receive notice. Therefore, I knew they filed the 1st and withdrew it, didn't know about the 2nd (I was having personal issues around the time the 2nd suit was initiated) and knew the clock was ticking on the 1st when 4 1/2 yrs (from the 1st) passed and I hadn't 'heard' anything I though they were just slow to get back to it. Then the lender sold the mortgage and the new servicer got the ball rolling again. I hadn't yet appeared in the suit and so claimed lack of jurisdiction/improper service, that was almost a year ago and I am still waiting for the judge to rule on whether or not to grant a traverse hearing. (The motion was properly filed. I rebutted specific facts/non conclusory proof I was not home and I live alone). The judge said he would like the lender and I to work together to try and modify/come to an agreement before he rules. So my question is, if I make a payment under a Temporary/trial payment plan and the statute of limitations has already passed, does that reaffirm the mortgage debt restarting the clock on the statute of limitations (similar to credit card debt)? I ask because I think the judge is not ruling because based on the law, he would have to order a traverse hearing and the process service company is out of business (they had a lot of bad service around the time I was served) and it's been over 6 yrs and they likely wouldn't have any documentary evidence of service and since I have proof I wasn't home and live alone, the outcome would likely be in my favor). All this and the statute of limitations having passed, the new servicer/lender could not file a new suit. So back to the question, would making a payment reaffirm the debt and start the clock again on the SOL? The trial mod payment is $1300 less than was my original payment amount. It's so low and I have such high arrears, I wonder if they just want me to make a payment. As well, there is no guarantee they will even offer me a mod if I make the payments and I'd been down that road with the 1st lender where I made months of trial payments just to have my mod turned down. I don't want to seem unwilling to work with the lender (as the judge has not ruled and despite what the law says, he may rule against me if I don't try to work it out), but do you think I can ask for a guarantee they modify if I make all trial payments? and see what the terms would be? also I don't want to make thousands in trial payments for them to offer me a higher mod, 45-50 yr term, giant balloon pymnt required mod that I won't be able to afford and then I'll have wasted my $ anyways. Thanks so much for your time and help. This is a Long Island, NY foreclosure case so NY rules apply. Reply to Mia Getz
Nadia Kourehdar January 18, 2017 1:26:20 AM GMT+07:00
Hi Mia - Thanks for sending in your question! This is a very specific questions related to NY law as we are not currently licensed to practice in NY, I would recommend reaching out to an attorney there. The only general advice I can provide is that any new trial plan or modification signed does become a new contract so if you're going to continue to try for the SOL argument - you likely wouldn't want to sign anything agreeing to a modified plan. Reply to Nadia Kourehdar
Chynell Gibbs January 19, 2017 10:08:01 PM GMT+07:00
I had a loan modification back in 2009, and the payments are lower but I will be paying on this loan for 30+ years. I don't want this at all, and I am ready to move. How can I get out of this without foreclosure? I'm just tired of paying and the value of the home is not worth 30 more years. Reply to Chynell Gibbs
Nadia Kourehdar January 19, 2017 10:15:56 PM GMT+07:00
Hi Chynell! Great question - many homeowners end up with a payment they simply don't think is worth it. I think it's a smart thing to get yourself to a more affordable situation. Is the home underwater? If so, you probably need to do a short sale - essentially - you will put the home on the market and sell the home for less than what you owe. The bank will have to agree to accept the money received from the sale as full payment on the mortgage. This is complicated and you probably will need someone to help you through the process because you want to make sure that the lender fully settles the debt after you sell the home. I would recommend reaching out to an attorney in your area who knows short sales and give you more State-specific advice. If you're in WA, AZ or NJ - please call our office so we can help you further. If the home isn't underwater, you can simply sell the home, payoff your mortgage and move on. Reply to Nadia Kourehdar
Kal Watson January 25, 2017 1:46:12 AM GMT+07:00
I have a loan mod in the form of a Subordinate Note with BOA from 2013. My question is can I apply for a HELOC or Home Equity loan without it affecting the Sub? Thank you for your time. Reply to Kal Watson
Nadia Kourehdar January 25, 2017 3:07:33 AM GMT+07:00
Hi Kal - This is probably a better question for an MLO or re-finance specialist as we are primarily focused on helping homeowners in default or at risk of imminent default but the short answer is likely, yes. I would strongly recommend consulting with an MLO in your State. Reply to Nadia Kourehdar
Andrea January 26, 2017 5:45:13 AM GMT+07:00
My mortgage was just referred to an attorney to start the foreclosure process. We are 5 months behind in MI. I might be able to come up with the reinstatement amount at the end of next month, which would make a total amount due for 6 months. I know I won't be able to come up with the reinstatement amount by the end of this month. I was considering applying for the loan modification just to stop or stall the foreclosure process and give me time to come up with the amount needed to reinstate the loan. Is this a good idea? Can I apply for the loan modification, then tell them I changed my mind, and ask the lawyer for a new reinstatement amount? I thought a loan modification would be a great option but after reading other people's experiences with the terms, it doesn't sound like a good idea at all. Reply to Andrea
Nadia Kourehdar January 28, 2017 3:45:11 AM GMT+07:00
Hi Andrea! Great question - you will want to talk to someone in your State about the specifics of your case but generally, nothing is final until a final loan modification is entered. Applying for a loan modification may postpone the foreclosure but often is not guaranteed so you'll want to make sure you're working closely with your lender to ensure that foreclosure activity is postponed. If your state is a dual-tracking State, the lender may be able to move forward with foreclosure while they review you for a modification. A lot of times, the lender does place foreclosure on hold to review a modification. As stated, nothing is final until you are completely approved and often through a trial payment period. Then, the lender will enter a new loan. Until that happens, both parties are usually free to back out of the deal. Please know that you should discuss this more with an attorney in your State as state laws and lender procedures vary. Reply to Nadia Kourehdar
Carolyn Bell February 11, 2017 10:41:08 PM GMT+07:00
Thanks you were very helpful and right. I was on a trial period once and was refused after. Another comp bought them out and they said now I owe $10,000 . Reply to Carolyn Bell
Nadia Kourehdar February 14, 2017 1:34:24 AM GMT+07:00
Interesting! Reply to Nadia Kourehdar
Tony Mollatari February 23, 2017 6:45:40 AM GMT+07:00
Just a general question. If someone receives a principle modification of lets say the home loan was 300,000 and the remodification is now 200,000 (the price of the current value) and the home goes back up in value exceeding 350,000 and then they sell, does the homeowner usually have to pay back the money or do they just get a free $100,000! Thanks, Reply to Tony Mollatari
Nadia Kourehdar February 23, 2017 6:59:24 AM GMT+07:00
Hi Tony, I would need more information to fully answer this question but I think you're asking - if the bank forgives $100,000 of the principal and then enters a new loan with a lowered balance, does the changing value of the home affect the amount they originally forgave? The short answer is - when a bank agrees to modify a loan, they enter a new loan that becomes binding. Unless it states otherwise, the new loan invalidates all other agreements. So, if the bank were to agree to reduce the principal, the new principal balance stated in the new modified loan would be the full amount owed moving forward. With that said, it is very rare for a bank to forgive that much principal. Typcially, they try to restructure the loan in some way to avoid them having to write off large amounts of debt. For more specific information, feel free to give us a call: 800-603-3525. Reply to Nadia Kourehdar
Ana Bella March 12, 2017 7:05:51 AM GMT+07:00
Our foreclosure was halted because of bk 13 filing however the new mortgage servicer asked a relief of stay which was granted by the court. We applied for loan mod and hv an agent work on short sale as option. we got an approval for a 3 month trial payment period (which was a surprise) to start next month. According to bank we owe $115K in arrears, orig loan is $485K. Our agent said the bank will just collect the 3-month payment to foreclose on us. We live in CA, my question is are we protected by the dual tracking prohibition stated on CHBOR while on the 3-month trial payment period? Also our short sale agent got an offer for $600K but said the bank is asking for $650K, is this legal? Our plan is to go with loan mod and have a straight sale in parallel. Appreciate your advice. Reply to Ana Bella
Nadia Kourehdar March 13, 2017 10:57:20 PM GMT+07:00
Hi Ana - I can't advise on the CA specific question, as we aren't licensed to practice in CA but I can tell you that generally, trial payment plans tend to put the foreclosure "on hold" for the duration of the trial period. The bank wants to see if you can make the three payments and they typically will not foreclose during this time. The trial plan is a good a indicator that they're willing to work with you. In order to confirm what will happen with the foreclosure, reach out to either the Trustee or foreclosing attorney handling the sale to confirm whether they've received instructions to put the foreclosure on hold during your trial period. It would be very unusual for a lender to foreclose in the middle of a trial period while you're current on payments to them. With that said, get confirmation from a CA attorney that this advice applies there and touch base with the foreclosing party. Reply to Nadia Kourehdar
Angela Avalos March 14, 2017 8:42:03 AM GMT+07:00
I have had HAMP tier 1, 2, and then the other tier 2. Is there anything after that for me? I'm about to finish school and my income will go back up. I have been at this for the last 4 miserable years almost. What to do? Reply to Angela Avalos
Nadia Kourehdar March 14, 2017 10:51:38 PM GMT+07:00
Hi Angela - Thanks for sending in your question. I think what you're saying is - you've been approved for HAMP Tier 1 and Tier 2 and now you're wondering if there are more loan modification options for you to apply for. Since HAMP expired in December, there is a new program called Flex Mod for Fannie Mae and Freddie Mac owned loans. This provides modification options so if you have one of those investors, I would recommend applying through this program. Having a prior approval through HAMP shouldn't disqualify you from this program. Also, your lender may have specific in-house programs outside HAMP that you can apply for. Ask your lender if there are any in-house modification programs that you qualify for. Reply to Nadia Kourehdar
Summer Preston March 16, 2017 3:49:58 AM GMT+07:00
We were approved for HAMP tier 1 and have just finished three month trial period and received a permanent modification offer. The tier 1 approval numbers do not match the modification terms. The principal forebearance is $30,000 less than the approval offer received prior to the trial. Also, there is no breakdown for nearly $50,000 being added to the new principal and a very short time to accept the offer. If we agree to the permanent mod, then ask for fees and figures added to the loan, is there any ability to challenge the new principal balance? Finally, HAMP tier 1 calculations extended the loan from 394 payments to 480, yet the new maturity date will occur in only 18 years or 2035; is that kosher under HAMP guidelines? Reply to Summer Preston
Nadia Kourehdar March 16, 2017 5:25:22 AM GMT+07:00
Hi Summer - It sounds like you may not have received a HAMP modification - that does happen sometimes. With that said, it also is a bit weird that the bank would provide you with so much information about the terms of your permanent loan before they show you the permanent modification documents. Typcially, trial plan approvals don't have much information included in them. Something is definitely going on if the information you provided is correct. Escalate your file to a supervisor at the lender and ask them what happened. Have them pull up you original TPP approval and go over the figures with them on the phone. Call: 800-603-3525 for more help. Reply to Nadia Kourehdar
Summer Preston March 17, 2017 1:13:10 AM GMT+07:00
Yes, we are referring to the permanent modification paperwork, the terms differ from the figures provided in the HAMP approval letter received in November. Reply to Summer Preston
Nadia Kourehdar March 17, 2017 5:56:20 AM GMT+07:00
Hi Summer, Okay - then you likely need to escalate the file with a supervisor at your lender and ask them why that happened. If you can show them different figures for the same line item, they should be able to tell you why they are different. What State are you located in?
Felicia quicksey March 17, 2017 4:01:01 AM GMT+07:00
hello, My parents are in a adjustable rate mortgage. I was thinking that a Modification would be a way to get them into a fixed. They are on a fixed income and my dad works less than 30 hrs a week. Is this a reasonable option? I know refi is out the question? Reply to Felicia quicksey
Nadia Kourehdar March 17, 2017 5:40:14 AM GMT+07:00
Hi Felicia - Are they current on their adjustable rate mortgage or in default? Reply to Nadia Kourehdar
Felicia Quicksey May 3, 2017 8:58:06 AM GMT+07:00
Yes they are current. Reply to Felicia Quicksey
Karen March 17, 2017 8:21:09 PM GMT+07:00
Good morning, we have been behind on our mortgage and offered a trial period modidification. I've been out of work for some time due to medical reasons and was approved for ssdi and will be receiving backpay in 4 weeks or so which will allow us to catch up on everything as well as due a couple of vital repairs on our home in order to put on the market. If I agree to trial period and make the first payment April 1, are there any restrictions for putting the home on the market in April? We are in Texas. Reply to Karen
Nadia Kourehdar March 17, 2017 9:43:22 PM GMT+07:00
Hi Karen - Please know that we are not licensed to practice in TX so this is only general advice but the short answer is likely no, there are no restrictions. Read the TPP carefully. Unless there are any restrictions listed in the TPP, you should be able to put the home on the market and back out of the TPP. Reply to Nadia Kourehdar
Karen March 17, 2017 9:51:05 PM GMT+07:00
Thank you! Reply to Karen
David McKeegan March 22, 2017 12:45:56 PM GMT+07:00
Hello Nadia, I know your firm does not practice in Texas, but I believe my question is a more generalized question. My home has been in a state of either a short sale, foreclosure, loan mod, back to short sale, then foreclosure again (most recent), and now US Bank sends me a letter today stating that I have been approved for the HAMP program. All of this has taken place over the past 5 years. I've had 3 realtors engaged to only have them withdraw the listing after US Bank refused to work with them on short sales. The mortgage was $207k when I started the process back Dec 2012. Since then, there are nearly $120k arrears, fees, and interest owed that they want to add to the original loan. Which in doing so, now in order to sell the home outright, it has to be sold for over $320k, which is about $60k over current market value. Which the issue I have with them about this matter is that back in Mar 2013 I had multiple offers on the home that were between $8k to $10k less that the $207k owed at the time. But US Bank rejected all offers. Then they spent the next 4 1/2 years jerking me around in different processes, all the while the arrears were just adding up. I've spoken to US Bank multiple times over the course of the last year to see if they would "forgive" just enough so I can sell and settle the loan. But they refuse too. My questions are: I received today (3/22/17) US Banks letter stating that I am approved for the HAMP program. I see where their TPP begins on April 1st, but they did not send the terms of the modification. Is this normal? During the last application phase, I applied for the short sale process, included a lengthy hardship letter, and all other documents requested each and every time. Is it normal for a lender to switch an application from one program (short sale) to another (HAMP)? This whole time I thought I was moving forward with a short sale approval, but the lender kept telling me that I had to first be "disqualified" or "not approved" for other programs. Is this normal? Thanks for the help. Reply to David McKeegan
Nadia Kourehdar March 22, 2017 10:20:54 PM GMT+07:00
Hi David - Please only take this as general advice but probably what you're going through is a waterfall process - where the bank requires that you go through modification review first in order to see if that is an available option for you. Basically, the lender is trying to see if there is a way to keep you in your home before they agree to let you short sell the property. Likely, they approved you for a HAMP modification at the beginning of this waterfall process. It is normal that they would only send TPP terms and not the full modification terms as most banks require that you make it through the TPP period before they release the full terms. At this point, my guess would be that you have a choice - accept the TPP and work towards modifying or you have to expressly reject the modification and request that the bank put you through short sale review. This can get complicated and you want to be careful about how you communicate with the bank. If you're going to reject your TPP, you need to communicate to the bank that there is no way you can afford it. I would highly recommend hiring an attorney to help you and provide more specific advice based on your situation. Reply to Nadia Kourehdar
David McKeegan March 28, 2017 3:57:44 AM GMT+07:00
Thank you Nadia. I spoke to the loan manager this morning and she did use the term "waterfall". She explained it just as you did. Do you do referrals for a firm in or surrounding Houston, TX? Reply to David McKeegan
Nadia Kourehdar March 28, 2017 4:20:13 AM GMT+07:00
Hi David! I'll go ahead and send your email to a firm that may be able to help you!
Donna Z March 28, 2017 2:46:16 AM GMT+07:00
Hi Nadia. So years ago we filed for bankruptcy and both my mortgage and home equity were discharged loans. However, we have still continued to pay as usual. Recently with taxes going up, along with everything else, making the payments on both of these has become difficult and I inquired about doing a streamline modification on the equity loan. My only concern is, if I apply for the modification and they feel that I do not make enough income to cover my expenses, can they turn me down and possibly forclose? I only ask since the loans are already discharged and it is a concern of mine. I am current with all of my payments, just want to get a lower payment on the equity loan so I can breathe! I would re-finance but my husband refuses (don't even ask.. LOL) Plenty of equity in the house too so I don't understand why he won't. Thank you. Reply to Donna Z
Nadia Kourehdar March 28, 2017 3:31:08 AM GMT+07:00
Hi Donna - If I'm understanding your question correctly, you're current on your loan and looking at options to apply for a loan modification. Lenders cannot foreclose on homes where the mortgage payment is current. If you miss a payment, they can then start the foreclosure process. You should be fine to apply for a modification if the payments are current. The lender will run their review and tell you if you qualify. Please know that this is only general advice and you should consult with someone in your State. Reply to Nadia Kourehdar
Jay C March 30, 2017 11:00:25 AM GMT+07:00
Hi Nadia, I filed ch7 bankruptcy and did not reaffirm my mortgage in 2014 and received a discharge. I was current on the mortgage until September 2015 and have not made a payment since. I had plans to turn over the property with a deed in lieu, but my circumstances have changed and I want to try and keep the home. My mortgage sold to Rushmore and I should be receiving a modification application soon. I inquired about a short refi and the Rushmore agent seemed hesitant on giving information on it. The short refi would be with a separate company Consumer Direct. Since the agent seemed hesitant, it makes me feel as though I have a better chance dealing with Consumer Direct and trying for a short refi. I also inquired about a settlement proposal. The current balance is approximately $139,000. Is there a certain percentage that a bank will consider for a settlement? Homes across from me in my neighborhood recently sold for $100,000 and $110,000. My home isn't as big or as nice as the sold homes and mine is much older. I highly doubt my home is worth $139,000. I'm in NJ and any advise is much appreciated. Reply to Jay C
Nadia Kourehdar March 30, 2017 10:35:07 PM GMT+07:00
Hi Jay C! Thanks for sending in your question. From my experience, I haven't seen Rushmore be open to many short refinances. They tend to only want to review and approve people for a loan modification. If they are telling you that they are open to having you work with a third party servicer on a short refinance, you may want to see if you can speak to the third-party directly. You may also want to have both servicers on the phone at the same time. Rushmore buys debt and they typcially want to collect on as much owed as possible. As far as a settlement offer goes, you can always make an offer to a lender. Nothing bad will happen from simply making an offer. In my experience, Rushmore isn't very open to alternative forms of settlement - they tend to stick to formal modification review. With that said, you can always try. You can always start with a settlement offer, see what they say and then request formal modification review. You'd want to do this in this order. Don't start with the formal modification review and then try to make them an offer. If you are going to start with a settlement offer, I recommend using an attorney - we can talk more about this to see if we can help you. Call me: 800-603-3525. Reply to Nadia Kourehdar
Jay Conrey April 19, 2017 11:46:40 AM GMT+07:00
Thanks Nadia! Since my last payment was in September 2015 and my mortgage just recently sold to Rushmore, is there an approximate timeframe before my house is foreclosed and I have to relocate? Reply to Jay Conrey
Nadia Kourehdar April 19, 2017 10:04:30 PM GMT+07:00
Hi Jay! This will depend on your State's foreclosure timeline so I recommend consulting with an attorney for an exact timeline or doing a little online research in your State's statutes to see how the timeline goes. The timeline will depend on whether your State forecloses judicially or non-judicially. If you have received an official foreclosure notice, the foreclosure timeline has started. Even though Rushmore purchased your loan, they still have to follow formal foreclosure proceedings in accordance with State law - they can't just throw you out of the home. Again, finding out what notice starts the timeline in your State and then finding out how long things take after that happens will help tremendously. Good luck!
Axel Duerr April 9, 2017 11:12:55 AM GMT+07:00
I made my last loan payment for July 2013. Finally in June 2016 the servicer initiated foreclosure proceedings. I applied for HARP and got accepted with the first TTP payment due for July 2016. In Dec 2016 the servicer added legal fees of ~$1,600 and interest of ~$1,400 without explanation. Last week they answered my inquiry and say it are unfiled expenses for bankruptcy proceedings going back to 2013. It is my understanding that I am only responsible for legal expenses incurred after the modification date. Is that correct? Reply to Axel Duerr
Nadia Kourehdar April 9, 2017 11:45:15 PM GMT+07:00
Hi Axel - You will want to take this to an attorney in your State for the best advice but generally yes. If you sign a loan modification, this is essentially a new loan. It should encompass all the terms of everything you're responsible moving forward. Look for a clause within the modification you signed that says something about how the agreement is full and final. That language should give you leverage to argue that the fees from 2013 shouldn't be applied. You'll want to show that to the lender. I have seen several banks start the foreclosure process even if the fees charged aren't legal so you don't want to let this get too far along. Reply to Nadia Kourehdar
Jan Short April 20, 2017 6:34:04 AM GMT+07:00
We just received our modification paperwork to fill out with Caliber home loans and it states "Note dated November 06, 2006 in the original amount of $133,000.00 (the "Note")." With original maturity date of December 1, 2036 Conditions to effectiveness of agreement Will be effective April 29, 2017 Modification period will take effect May 1, 2017 First modified payment due June 1, 2017 The term of the note has been extended and the new maturity date is May 1, 2057 ( almost 20 years later than original) Modification principal balance Unpaid principal balance payable under the note is $111,0357.09 (the "Modification Unpaid Principal Balance") this amount consists of $104,975.99 remaining due under the original terms of the note plus some or all unpaid amounts that capitalized into the modification Loan (Capitalized Amounts). Summary of Modified Monthly Payments: Modified Unpaid Principal Balance: $111,035.71 Modified interest Rate: 5.91% Modified Monthly Principal and Interes Payment: $603.98 Monthly Escrow Payment (Taxes and Insurance) $422.98 Total Modified Monthly Payment $1026.96 ($1288.00 original Minh,y payments) First Modification Payment Date: June 1, 2017 I'm in Texas and I want to know if this would be a good idea for us I just recently lost my job and living one one income now. With the new revision we are able to afford the monthly payments, but I'm due to start work in about a week or so. Thoughts please Thanks Jan Reply to Jan Short
Nadia Kourehdar April 21, 2017 12:42:51 AM GMT+07:00
Hi Jan - Thanks for sending in your question. Since you are in TX, I would recommend taking your modification to an attorney there for more specific advise. With that said, determining whether you want to accept a modification depends on your ultimate goal. If you can afford the payment and your income is stable and your ultimate goal is to retain the home, than accepting the deal is likely in your interest. There isn't anything unusual about the language you provided - many banks make modifications affordable by extending the terms of the loan. I believe you'll have to think through whether you believe you can stay current and want to stay in the home. If so, this may be an okay loan to accept. With that said, please know that I haven't seen the whole document nor am licensed in your State so take the document to an attorney there. Reply to Nadia Kourehdar
Jan Jan April 21, 2017 3:09:08 AM GMT+07:00
Thanks for the quick reply Nadia :) If we could how would making extra monthly payments toward the principal work in our case? Good idea or not so good? Jan Reply to Jan Jan
Nadia Kourehdar April 21, 2017 3:16:33 AM GMT+07:00
Hi Jan! You would want to check to see if there were any prepayment penalties listed in your final modification first. If there are, then you won't be able to pay down the principal. If there aren't, then you may be able to do that but each lender processes those requests differently. Don't overpay until you speak to the lender to ask how you can be assured that the extra money will go toward principal only - they may need you to send the funds in differently. It's a good idea as long as you intend to stay in the home for the duration of the loan and the bank allows you to pay down the principal.
Mary Chinelli April 26, 2017 2:01:22 AM GMT+07:00
My servicer keeps sending me a whole lot of different numbers that I don't trust them. All the educated people don't even seem to makes heads or tails with my loan/what I owe/ numbers after a opps..you didn't send the paperwork in soon enough now you will really pay more for just one mortgage than the two you once had with more years. My credit is over 644. Can I get another loan from somewhere else and just pay the $150,000 off? I think they are adding lots of stuff like ( they lost twice in court ) to my $150,000. Reply to Mary Chinelli
Nadia Kourehdar April 26, 2017 2:44:07 AM GMT+07:00
Hi Mary - A lot of people experience what you're going through. Banks often have a hard time processing documents and being clear about what is owed. I would contact an attorney to help you through this process. Banks often add illegal late fees to payoff amounts or purposely push out reviewing a file in order to move forward with foreclosure. Taking out another loan doesn't always work and should likely be your last option. Try getting help from a professional before you go down this path. Reply to Nadia Kourehdar
Jan smith April 30, 2017 7:29:59 AM GMT+07:00
Hi I just qualified for a loan modification with a lump sum in 20 years. My interest rate will go from 4.5 to 2.9 which will bring my payment to affordable. I know I can't stay in this loan forever or I need to figure how to come up with the 280k lump sum in 20 years prior to the 20 years. My question is if I have 1 year of on time payments already and my loan is in good standing could they foreclose on me if I make all my payments on time? I had 3 late payments 1 year ago and only because I was advised by a company I hired to attempt a loan modification for me not make my payment for 3 months in order to qualify for the loan mod. Well, that did not work and ruined my credit. I do not have a problem making my payment I just need a better interest rate and due to the 3 late payments last year I cannot refinance for a few more months. I have credit score of 720 so I figured I could buy some time until the interest rate drops. I just want to confirm they have no legal right to foreclose on me. My bank is OCWEN and they are know for bad behavior. Reply to Jan smith
Nadia Kourehdar May 3, 2017 12:30:58 AM GMT+07:00
Hi Jan - Please know that this is only general advice. With that said, if the new loan modification given to you by Ocwen is fully recorded and you make the monthly payments on time per the terms of the loan agreement, it would be illegal for Ocwen to foreclose. Even if you don't see how you can pay the lump sum in 20 years, making the monthly payments on time per the terms of the new loan will keep you current and they cannot foreclosure. Banks can only foreclose on you if you are in default, or missing payments. Reply to Nadia Kourehdar
Evelyn Torres May 20, 2017 8:17:03 PM GMT+07:00
Thanks for your post, we have applied for a LM thru an attorney and have found that he has not even reviewed our account with the bank. Our payment increased by $600 instead of lowered and the reason this all happened is due to loss of income due to accident and terminal illness. The numbers we submitted (me the daughter being a contributor) only increased the monthly payment. I feel my attorney did not act in our best interest and he has pressured us to accept the terms which we can't afford, what can we do....we want to save the house but our situation has changed financially.... Reply to Evelyn Torres
Evelyn Torres May 20, 2017 8:34:08 PM GMT+07:00
How long can an application be open before underwriting has all the docs needed and can review it? We were told our app was expired and had to submit a new one then later told the HAMP Program was no longer available....no programs were offered to us? Reply to Evelyn Torres
Nadia Kourehdar May 23, 2017 5:43:54 AM GMT+07:00
Hi Evelyn - Good question! It sounds like what happened to you is lender bad faith. Many lenders will delay review so long, options for homeowners expire. Unfortunately, lenders don't have strict guidelines for review and they can continue to call packages incomplete indefinitely. This is part of how they mess with homeowners. You have a couple options at this time - but most importantly, you need to get a complete package with the lender and get in touch with someone who can stay on the lender to make sure they don't do this to you again. HAMP is now expired but there are other programs you may qualify for. I would recommend looking into FlexMod and speaking to an attorney in your State for specific options. Reply to Nadia Kourehdar
Brian K May 22, 2017 10:26:06 AM GMT+07:00
Hello, I have had a loan modification for 3 years, my fiancé has bought our next home already and have since moved for past 4 months almost. I had requested with bank late last year for total payoff and it showed an exact amount which shows considerable equity. Now that I'm working with an agent he just pulled information that shows the primary lien and secondarily lien now which total more than my home would ever be worth???? I'm freaking out now, anybody know what this means? Thank you Reply to Brian K
Nadia Kourehdar May 23, 2017 5:40:55 AM GMT+07:00
Hi Brian - It is possible that your home is underwater - meaning you owe more than the home is worth. That can happen - what you need to do is to pull another payoff from the lender and run it against how your agent is valuing the property. If you are underwater and looking to sell the home, this is likely a short sale situation. If you are underwater but close to the full payoff amount, you may have to bring money to closing to cover the difference. I would recommend touching base with an attorney in your State to talk about your options - they can also help you pull an accurate payoff. Reply to Nadia Kourehdar
Leticia Maciel May 26, 2017 11:09:34 PM GMT+07:00
We recently decided to purchase our 1st home. The loan company and agent we were working with highly suggested and stayed away from short sale homes. We agreed due to the challenges and difficulties of going with a short sale home. A home was listed for sale with no indication the home was short sale nor that the owner submitted a loan modification. We proceeded with paying an inspector and an appraisel. We also assisted in helping with some repairs so that the appraisel could pass their inspection/requirements. About 2 days before closing on the home, our agent notified us the seller and the sellers agent contacted her to notify her about the loan modification approval therefore the closing on the home was cancelled. My family, which includes 3 of my children and disabled husband are left homeless as we had to move out of our prior home because we were under the impression we were moving into our new home. If our agent and on the listing that was posted online indicated this was a short sale or if the seller wouldnt have omitted the loan modification information to any of us, we wouldnt have wasted our money and time as we would have not gone through with this process due to the situation we were preventing on getting into. Sorry for the long explanation. my question is, do we have the right to get the funds we paid for the appraisel and inspection from the seller as we wouldnt have gone through with the process if the seller would have been honest with us? The funds would really our family while we settle into a new place. I appreciate any help or feedback. Reply to Leticia Maciel
Nadia Kourehdar May 26, 2017 11:56:35 PM GMT+07:00
Hi Leticia - I'm so sorry this happened to you! I would have to look at the real estate laws of your particular State but most States require that a short sales be disclosed in the listing before an offer is made. Did you sign anything called a Short Sale Contingency agreement when you made the offer? You may be able to get your money back but it may mean you'd have to sue them due to violation of the listing agent's real estate laws. I wouldn't be able to fully advise on this without knowing the real estate laws of your State so I recommend taking this to a real estate attorney and seeing what your options are. If they really did hide the fact that it was a short sale, you likely have the right to some restitution. Reply to Nadia Kourehdar
Leticia Maciel May 27, 2017 2:46:29 AM GMT+07:00
I appreciate the quick response. I live in washington state (skagit county) so im hoping it is a requirement in our state that the listing should have indicated this. I personally read the online listing on the propert and it didnt indicate in any way this was a short sale. We never signed a short sale contingency either. Your feedback/assistance has been very helpful. Thank you! Reply to Leticia Maciel
Nadia Kourehdar May 27, 2017 2:54:08 AM GMT+07:00
Hi Leticia - You're in Washington! Great. Give us a call when you have a few minutes to chat: 800-603-3525.
Chris M. June 9, 2017 1:48:19 PM GMT+07:00
I bought my home in 2005. I modified my mortgage in 2013. My loan maturity date to this day still says 2035 on my mortgage statement. Question is , should the date have changed to reflect the modification date or still be at the same 30 yrs. I want to refinance now, but if I have 12 yrs down instead of 4, I'll need to think more about doing it. Reply to Chris M.
Nadia Kourehdar June 13, 2017 2:30:42 AM GMT+07:00
Hi Chris - Thanks for reaching out! I wouldn't be able to answer this without looking at the documents and understanding more about your situation. I can tell you that generally, modifying loans tends to extend the maturity date as the lender usually tacks on arrears to the end of the loan and then extends the term to make it affordable. Reply to Nadia Kourehdar
Leigh G June 13, 2017 7:44:02 AM GMT+07:00
In 2011 we owned our 5 acre property in Montana free and clear. We went to a local bank and got a construction improvement loan based on the banks appraised property value of 140K. So we built our home, did it ourselves, took 3 years to complete, big log home 2800sf and then in 2014 we went to quicken to refinance the construction loan to a normal mortgage. They did an appraisal that came in at 650K so we opted to loan 400K and have 250K of equity. Things went well then in 2015 my husband left me and it was common law marriage so he just walked away and left me with the bills. Long story short, I put the property on the market for a year, no views. My realtor kept dropping the price and even went down to 300K which was 75K less than owed and still no interest. I walked and quit paying the mortgage. Now quicken want to foreclose, have offered me a deed in lieu and now a loan mod and I have agreed to move back in but the more I think about it the more I wonder how on earth the appraisal came in at 650K which is what I based my loan on and now what the realtors are telling me .. 200K ... I think I need to sue quicken for non due diligence by their appraiser. What do you think ? Reply to Leigh G
Nadia Kourehdar June 15, 2017 10:12:47 PM GMT+07:00
Hi Leigh - I'm so sorry to hear that this has happened to you! Sounds stressful. I would need more information and to see the original appraisal to fully advise you but it sounds like your property value has dropped. You can touch base with a local realtor to run Quicken's appraisal by them and your current property value to confirm that the value simply has dropped. If you think Quicken's appraisal was fraudulently high, you always have the option to sue them but I tend to want to tell people to do what will provide them the quickest and most cost affective path to a fresh start. It may be that you might just want to sign their Deed in Lieu offer and move on so you can put the whole thing behind you. Since I'm not in Montana, I recommend taking this to a local attorney for their advice. Reply to Nadia Kourehdar
Jamie Bowers June 26, 2017 3:43:14 AM GMT+07:00
We did a loan mod in 2013 with BOA just to get a better interest rate and now we are selling our house and come to find out we owe HUD almost 5k. We didn't know anything about this lump sum we'd owe when selling. We will be fighting paying the lump sum. Should we ask for documentation showing our signatures during the loan mod? Reply to Jamie Bowers
Nadia Kourehdar June 27, 2017 2:27:51 AM GMT+07:00
Hi Jamie! I'm not 100% sure what's going on just based on this short description but if you have FHA - when you modified, they likely attached something called a Partial Claim as a type of second mortgage to the home in order to reduce your interest rate. This is the mechanism through which FHA and HUD modify loans. Get a copy of the modification documents you signed and look to see whether you signed a partial claim. It is possible that you do owe this amount. Reply to Nadia Kourehdar
K Kelly July 4, 2017 10:14:36 AM GMT+07:00
Hello! My husband and I got divorced and I gave him the house (which he agreed to pay me half the equity). My name is still on mortgage because he couldn't refinance because of his bad credit rating. Now he wants me to sign a loan modification. I want my name off the mortgage. If I sign this loan modification for him, will he be able to refinance in the near future and get my name taken off mortgage? He has just given me these documents today and wants them back tomorrow. I'm worried about signing this. Thanks for any advice you can give me. Reply to K Kelly
Nadia Kourehdar July 10, 2017 8:45:45 AM GMT+07:00
Hi K Kelly! Thanks for sending in your question. It's important to understand that even with a divorce decree awarding the house to one spouse, that doesn't change the terms of the mortgage so the reason you're being asked to sign the loan modification is because your name is still attached to the original loan. Getting your name off in the future is called an assumption - your exhusband will have to apply for an assumption in order to remove you from the loan. If you don't sign it and the home goes into foreclosure, your name will be liable as well so it may be best to support your ex in getting the loan current and then working together to figure out next steps toward the assumption. It is always easier to work with a bank to adjust things like borrowers attached when the loan is current. For more specific advice, please make sure you consult with an attorney in your State. Reply to Nadia Kourehdar
Lauren Jewel July 26, 2017 10:48:01 AM GMT+07:00
Great article that I wished I had seen sooner. My loan was sold to another lender. I have my payments set to go out automatically and pay on the first of every month. I have never been late. After receiving a letter saying I was behind more than two payments and the foreclosure process would be started, I spent several weeks on the phone trying to sort it out. After reviewing all of the banks records, I discovered that more than one of my payments had been applied to principal rather than my regular payment. I thought it would be an easy fix. The bank told me they could not correct it because they money was already paid to the investor and I should have caught it sooner. They said my only option was the pay the full amount, or to do a modification. I started the process but no one ever called me back. I would call daily and be told I forgot to check a box or missed some form. I would send it immediately. I just got a letter saying I didn't turn the forms in on time and my case was closed. Is there any legal recourse I have about the misapplied payment or should I just try to go through the modification process again? Reply to Lauren Jewel
Nadia Kourehdar July 28, 2017 3:44:39 AM GMT+07:00
Hi Lauren - I'm so sorry to hear that has happened to you. Unfortunately, you're not alone - this type of thing happens to many homeowners. You have a strong argument for a lawsuit against your lender but my guess is you probably just want it resolved. I would hire an attorney in your State to both help you apply for a modification while you continue to fight against the misapplied payments. You need to find someone who can escalate the matter directly to the investor. You'll want to try to get them to correct their mistake while you have a modification application in review in the event that they won't correct the mistake. It tends to be good to put in writing the mistake the bank made and threaten to take legal action to help them take your case more seriously. Reply to Nadia Kourehdar
A Wats July 28, 2017 10:59:18 AM GMT+07:00
My husband is the only one on the loan.He wants to apply for loan modification using only his income.Mortgage is 600 and his gross income is 1600 a month.. Will it be beneficial to show my income or just use his? Reply to A Wats
Nadia Kourehdar July 29, 2017 5:12:48 AM GMT+07:00
Hello! I would need more information to fully advise. Banks look at a DTI (debt to income ratio) in addition to other factors when determining whether to approve a loan modification so your expenses and how you report them matter as well. If you apply with just your husband's income and are denied because the lender can't make it work, you do likely have the option of appealing with your income as well or vice versa. Typcially, if you're denied, there is an appeal period or a period where you can submit new financial documents. You may want to call your lender and have this conversation with them - they may be able to give you a heads up about what type of monthly income will give you the best shot. Reply to Nadia Kourehdar
Jack T August 4, 2017 1:06:32 AM GMT+07:00
I am in the early process of a loan modification. I have significant equity in my house, but it is a house I live in. Selling is not a option for a variety of reasons. There is an auction date for my property , in 6 weeks, if I can trust them, so I am in real danger of losing my home. I have some money to bring my loan current but I needed that money to pay the IRS, because if I don't, the IRS will take my house. My question is, what incentives do mortgage companies' underwriters have to give me a loan modification when they can foreclose and sell my house and take all my equity? Reply to Jack T
Nadia Kourehdar August 4, 2017 4:47:46 AM GMT+07:00
Hi Jack - If I understand your question, you're asking why would a bank work with you on a loan modification when they could just take it to foreclosure? Great question! Foreclosure is expensive for the lender - it costs them money to hire an attorney and to legally foreclose. At foreclosure, they only receive the fair market value of the home. If there is equity in the property - meaning if the home sells at foreclosure for more than is owed to the lienholder, they don't get that money. That money is called surplus funds and you would have to file a motion with the court to get that money. Basically, the bank only gets what they're owed at foreclosure, most of the time less that what is owed if the property is underwater. They are incentivized to work with you on a modification because it can make the bank more money over time. Usually, they will agree to let you make modified payments and will spread the arrears you owe over time so they are paid what they are owed plus a little bit extra for the additional amount of time you're paying toward the loan. Reply to Nadia Kourehdar
Aisha August 9, 2017 8:02:55 AM GMT+07:00
I'm so confused with the loan modification. We applied due to going through bankrupt Chaoyer 13 and converating to 7 as well as being wrongfully advised not to pay a few moths prior to filing. Anyway, to save our house and/or mortgage company being granted relief of stay we file loan modification. I'm looking at the approval trying to figure out why the payments only went down $7. I noticed the interest rate is higher than what I currently have. How is that possible? We closed two years ago with 3.5% and now they trying to give us 4.25% with loan mod. Please explain. Reply to Aisha
Nadia Kourehdar August 10, 2017 3:48:09 AM GMT+07:00
Hi Aisha - I would need more information to fully advise on what is going on. All I can say with this amount of information is that, if you are behind and the bank is offering you a modification, they typically try to redistribute the arrears over the loan. Sometimes, this makes the monthly payments stay the same or even go up. In order for the bank to approve a modification, they have to create terms that will work for them so the increased interest rate may be the only way to make it work. With that said, I simply don't have enough information without seeing the documents/numbers to fully advise. I would recommend taking this to an attorney in your State. Reply to Nadia Kourehdar
Gus Castro August 19, 2017 12:52:24 PM GMT+07:00
This was a modification, What meant "this amount may also included potential principal forgiveness", they talking about non-interest bearing principal balance. Reply to Gus Castro
Nadia Kourehdar August 21, 2017 10:36:14 PM GMT+07:00
Hi Gus! I would have to see the document in its entirety to be able to fully advise. I would recommend taking the document to an attorney in your State for review. With that said, they probably gave you a full amount remaining on your new modification. They may have written off some of the past principal balance and they may be telling you that. That would be my guess just based on this one sentence. Reply to Nadia Kourehdar
Jeffrey Wilson September 1, 2017 7:08:35 AM GMT+07:00
My father passed away and I was willed his house.. i just received an assumption and loan modification package.. the mortgage has been unpaid for 3yrs.. I want to move into the house...how do i know if the loan mod is good for me? what are some things i should look out for and what are some things that would make me not want the load mod and assumption Reply to Jeffrey Wilson
Nadia Kourehdar September 2, 2017 3:18:45 AM GMT+07:00
Hi Jeffrey - Look at the terms of the loan and what they're offering. If they're offering an assumption, that means you would be fully taking over the loan. It would be yours moving forward. Check the interest rate, the term, the payment. Check for any prepayment penalties. Check for any balloon payments, adjustable interest rates, payment changes before the term of the loan runs. It is probably worth it to take it to an attorney in your area to do an audit of it so you complete understand the terms. Reply to Nadia Kourehdar
Elizabeth Pollard September 4, 2017 4:39:14 AM GMT+07:00
Have a balloon payment due in February of 2018 and only have half the money I need I don't want to lose house lived here 28 years tried to get loan but refused house because of asbestos siding don't know what else to do Reply to Elizabeth Pollard
Nadia Kourehdar September 5, 2017 8:43:42 AM GMT+07:00
Hi Elizabeth - It sounds like it may be the right time to apply for a loan modification. I would need more details in order to fully advise you on this but you are able to re-modify the terms of a loan even if you are current. If you know you can't afford the upcoming balloon payment, you should reach out to your bank and try to negotiate a loan modification so you can continue to stay in your home. Consult with an attorney that is near you as well. Best of luck to you! Reply to Nadia Kourehdar
Diana September 9, 2017 3:45:27 AM GMT+07:00
My brother has several loan modifications on his house but wants out. Base balance is 87K, plus 18K payable to HUD (HAMP?) Lender sent "family assumption package application" for an Assumption of Liability Agreement. It states that adverse credit reports on this account would continue forward when assumed. I have good credit so I certainly don't wish for this association to tarnish my own credit in any way. We had already discussed doing a lease purchase agreement between my brother and I, with option to flipping it in the interim and/or buying out the loan after a year, whichever comes first. This was successfully done when his son could no longer afford his home. When my brother spoke to his mortgage lender, they said that in the assumption transaction the balance assumed would only be the base of $87K, and not the additional $18K. Can you explain this? Also, I wanted to know that when we buy out this loan in full after a year, after the lease to purchase term has expired, and using our own VA loan financing, would the buyout balance still be the base balance due, or would they include the $18k owed to HUD? I ask because if they are willing to forgive the $18K for an assumption, then wouldn't it be fair to assume that the same is true for a buyout? Technically speaking, the modifications and incurred penalties of the current account are not the burden of the new buyer. So the balance belonging to HUD will become an unpaid balance that is the default and responsibility of my brother who would in turn get a negative credit reporting that could last for a very long time, at the least. His lender will not know that a lease purchase agreement would be in place. They will just continue to be paid over the course of a year and then the entire loan bought out. Reply to Diana
Kingston Bowen September 12, 2017 5:28:57 AM GMT+07:00
Hi Diana - It sounds like your brother's modification includes a partial claim. That is a portion of the principle balance that is set aside as a separate debt due to HUD, which is why you cannot assume the debt through the mortgage lender. Generally, these partial claims are due either at the maturity of the mortgage or at sale, so this debt will most likely need to be paid in order to close any sale. I would recommend speaking with an attorney in your area about to review these documents with you and help you put together a plan for next steps. Reply to Kingston Bowen
Diana September 13, 2017 3:36:32 AM GMT+07:00
Thank so much for your reply. I appreciate your information. I have since learned that the mortgage company is actually only a service provider, not a bank but a third party servicing company called Ocwen Loan Servicing LLC, Florida. I googled them and they don't have the best track record, are being sued by the state Atty General for mishandling of foreclosures but have been around since 1988! They have a statement on the bottom of their documents that say they are a debt collector attempting to collect a debt, etc... They have sent my brother an assumption package and have claimed that the amount that would be due would be the $87k alone. I'm as confused as you are in terms of the outstanding balance owed to HUD. But this is what they were told over the phone. I can't help but think that Owen will stop at nothing to get money from whomever is willing to pay the balance versus having to foreclose and go through those proceedings. If I can just get a signed confirmation from them that only that balance is due, we can work on our own understanding and then buy out the loan. What is your opinion? Reply to Diana
Kingston Bowen September 13, 2017 4:54:09 AM GMT+07:00
Hi Diana - I would definitely get the payoff information in writing from Ocwen before making any decisions. If HUD is involved, they will likely need to be paid as well if the property is being transferred.
Shannon Aryadarei September 11, 2017 9:18:06 PM GMT+07:00
Good Morning! I was hoping you can shed some light on our situation. In 2013 my husband lost his job so we applied for a loan mod. In 2015, the bank (BOA) gave us a principle reduction and lowered our interest rate to 2%. We were on time with payments then August 2106, I started having seizures which took my drivers license away for 6 months which meant I had to stop Realty was my income and my husband is on disability. So we were 3 months behind and was ready to resume payments when the bank stated they began foreclosure. We obtained counseling so we can try to add the past due payments to the end of our terms since we can't go lower on interest rate. Presently, I am interviewing to go back to my paralegal work so I will earn the least 3500 month and my husband was offered to go back to a new store his old work opened to making 4000 month and getting off disability. I know we can show good income soon. Should I presume of I can show good income that the bank will let us modify our terms? This is where I am confused at what to do. We have good equity in our home. The one thing we came up with was to sell, rent for a year that will allow us to work on raising our credit and income then start over and buy next year. Plus our house needs complete updating. I also looked at our modification from 2015 to see if they would add our reduction back on of we sell but the only thing it states is if we decide to sell, we need to get approval from bank as to us paying the reduction but it states permanent and there is no time line of when we can sell. Plus, the last modification changed our loan from FHA to conventional. We reside in Philadelphia, PA. Thank you for any advic.e. Shannon Reply to Shannon Aryadarei
Kingston Bowen September 12, 2017 5:48:38 AM GMT+07:00
Hi Shannon - A modification in this circumstance is a possibility even with the reduced interest rate. A reduction in interest rate is just one of the tools lenders will use to create an affordable payment in a modification. If you have equity in the home then a sale would be a possibility as well. The best next step depends on how far along the lender is with their foreclosure action. Since you are in Pennsylvania, I would encourage you to reach out to Ark, we can get you connected to one of our attorneys to talk about your options. Reply to Kingston Bowen
Chris K October 12, 2017 2:24:18 AM GMT+07:00
I did a loan mod after closing my business and getting a "real job". After my 3 month trial I was surprised to see my mortgage balance go up by $10,000, my interest rate go from 3.875% to 4.25% and my mortgage term "start over" for another 30 years after living in my home for almost 4 years. Is this legal on the part of the mortgage company?? Reply to Chris K
Kingston Bowen October 13, 2017 5:29:15 AM GMT+07:00
Hi - What you are describing sounds like a form of modification. Often lenders will add the pastdue interest back into the principal, which is why you see your balance increasing. Interest is usually set at market rate, which accounts for that increase. An extended term is a typical method for a lender to keep the payments affordable. If you are concerned about the terms of the modification, I would recommend speaking with an attorney in your area and review those terms before formally accepting. Reply to Kingston Bowen
Kevin Bass December 15, 2017 12:00:30 AM GMT+07:00
Quick question. I did a loan modification because of an injury where I was out of work for 5 months. They reduced my payment by 700 a month yet actually increased my interest rate by almost a full point, although they did not LinkedIn the term. It is an FHA loan and it seems like a large portion was deferred to HUD. My question is, will I have a balloon payment doable to HUD at the end of the term. Reply to Kevin Bass
Kingston Bowen December 15, 2017 5:01:30 AM GMT+07:00
Hi Kevin - Great question! It is likely that there will be a payment due to HUD at the loan's maturity. These usually are not interest bearing, I would advise you to speak to an attorney in your area to go over those terms! Reply to Kingston Bowen
Lillian Logan January 21, 2018 12:22:13 PM GMT+07:00
My mortgage co. has a schedule date to foreclosure and then they offered me a loan modification which I am currently into. They say it will not be foreclosed if I meet the 3 month trial period. even thou I keep getting letters from law firms wanting to help me because they got information that the foreclosure is on a certain date. How do the mortgage co. cancel the foreclosure date.. The foreclosure date comes in the the 2nd month of the 3 month trial period. Should they cancel the foreclosure date? Is it their responsibility to stop it. All they say is that it is the original date of the foreclosure and will not be foreclosed on that date since I am in modification if I met their requirements which I am doing so. Is it their responsibility to cancel the foreclosure while I am in this modification process with them. Reply to Lillian Logan
Kingston Bowen January 23, 2018 5:25:13 AM GMT+07:00
Hi Lillian - Great Question! Lenders are not supposed to hold a foreclosure sale date if there is an active modification offer, but they will often keep a previously scheduled sale on the calendar. The problem is that the lenders don't always communicate with their attorneys and this can lead to a mistaken sale. My advice would be to speak to an attorney in your area on this, because relying on the lender to inform the foreclosure attorney of the overall status could lead to a foreclosure going forward while you're in the middle of paying! Reply to Kingston Bowen
Manuel Bolanos February 1, 2018 10:43:26 PM GMT+07:00
Hi. I had lost my job last year, was approved for loss mitigation. I took advantage of the situation. Continued to pay 10.00 a month as agreed even right after the agreement with the home lender I got a job. Now I'm getting ready to apply for loan modification. My question is, will it affect me even though I've had the income to pay my mortgage in the long run? Reply to Manuel Bolanos
Kingston Bowen February 2, 2018 9:26:15 PM GMT+07:00
Hi Manuel - That is a great question. Generally a modification review is a snapshot in time, so the lender will want to see your most recent pay verification, but a situation like that may take an additional push on the lender. I would recommend speaking with an attorney in your area to go over strategies for your modification application. Reply to Kingston Bowen
Mike McGuinness February 9, 2018 10:59:06 AM GMT+07:00
Hi and thanks for the great advise on the site. Couple questions: in a Modification application, what are the banks looking at in order to approve ? Net income or gross income ( if self employed) or just steady income stream ? Our area is seasonal and showing P/l for just 3 months doesn't reflect per se. Also, we applied for modification, and they started forclosure anyway but not the bank, it was fanne mae filed in court. So its like the mod wont matter ? Can we stop the process by pay arrears, but also the complaint stacked on 15k in atty fees, how can it be to pay arrears and massive fees, cant do both ? We are disputing the fees, but concerned is all lost regardless of our actions. But, we also wanted to make the application as good looking as possible, (they are asking for more docs) which we can supply. . Thank you - that sounds like a lot LOL Reply to Mike McGuinness
Kingston Bowen February 9, 2018 9:47:14 PM GMT+07:00
Hi Mike - Generally modification reviews will be based on gross income. I definitely understand the concern about seasonal income, but there may be ways to present your income in the best light for the modification review. My recommendation would be to speak with an attorney in your area about your application and the foreclosure action FNMA started. Reply to Kingston Bowen
Michelle Wesley March 23, 2018 7:55:27 AM GMT+07:00
I have been offered a modification loan. I had a fire in my rental property last year. One apartment of three empty. Insurance was a joke and I only got one third of what they said it would cost to fix it up. We fell behind on the mortgage due to getting it fixed and one apartment empty. We don't live there. 7 months behind.... I pay $700 normally. The modification is for 40 years and $653 a month. 3 month trial and then it becomes permanent. My question is that I only owe $29,000 and the payment is not that much lower than my current mortgage payment. I asked her why and she said due to ESCROW, fees and 7 months behind. If I sell the house this summer, do I still owe $29,000 or do I have to pay a huge amount of money because of the modification to 40 years? Thank you Reply to Michelle Wesley
Kingston Bowen March 23, 2018 10:24:35 PM GMT+07:00
Hi Michelle - The answer depends on where you are in the modification process. If the modification is not yet permanent, the original terms of the loan will still control. You would likely still owe the back-due interest, however, so the total amount may be similar. I would recommend that you sit down with an attorney in your area to determine the best course moving forward with this modification. Reply to Kingston Bowen First Name
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