Mortgage Modification
Experience has shown that a mortgage modification is most likely to occur through the teamwork of a client and his or her attorney. Each brings special knowledge and talents to the table. Preparation and attention to detail are the keys to success!
At Corash & Hollender, P.C. we have a wonderful success ratio for obtaining mortgage modifications. Please review the information below to gain a better understanding of the process. If you would like a helping hand to assist you through the process, we look forward to hearing from you.
What to Expect from Your Mortgage Company?
Some of the effort that will be required of you is a commitment to assist your mortgage servicer in every way you can. Your mortgage servicer wants to find a way to keep you in your home. Giving you a loan modification brings them lower returns but the cost is far less than a foreclosure would cost them. So your mortgage servicer’s biggest concern is whether you can comfortably pay the new modified payments. In addition to a standard document that most servicers require, the more information you can provide to assure them that you will be able to make the new payments, the easier it will be for them to review and evaluate your application for a modification.
What is HAMP modification and is my Mortgage Company participating in the program?
Home Affordable Modification Program is a government subsidized modification. Not all servicers participate in HAMP program but usually they offer some kind of in-house modification to qualified borrowers.
My loan is scheduled for foreclosure soon. What should I do?
Contact your servicer immediately and ask to be considered for modification. Servicers participating in the HAMP program are not allowed to proceed with a foreclosure sale until you have been considered for a modification under HAMP, and, if eligible, offered a trial modification.
How long will modifications under HAMP be available?
HAMP expires on December 31, 2013. You must have submitted your Initial Package by that date.
My rental income was not reported on last year’s tax returns because the property was vacant. What documentation do I need to validate rental income?
In such cases where a property has recently been rented, a signed Rental Agreement contract must be provided to show the property address, date of contract, lessees name and address, rental amount and rental period. The contract must be signed by all parties (lessor, lessee, rental agents etc.)
How do I get evidence of benefit income (e.g., social security, disability, death benefits, pension, public assistance, adoption assistance)?
You can provide a copy of benefit letters/statements, disability policy, or receipt of payments such as copies of two most recent bank statements showing electronic deposit of benefits.
I’m self-employed. How do I get a copy of my most recent quarterly or year-to-date Profit and Loss Statement?
Contact your Accountant or the Licensed Tax Professional who assisted you in completing your tax documentation.
What information and forms will I need in order to be considered for modification?
To request a loan modification you must first contact your servicer and provide the following documents:
- Request for Modification
- Tax Authorization forms 4506-T or 4506T-EZ
- Proof of income, last paystubs, last tax returns, bank statements, utility bills, etc.
I do not live in the house that secures the mortgage I would like to modify. Is this mortgage eligible for a modification?
If you own a house that you use as a vacation home or that you rent out to tenants part of the year, the mortgage on that house is not eligible to be modified under HAMP. However, you may be eligible for some other modification. Also, if you are in the military or are otherwise displaced and are not currently living in your home, you may be eligible for a HAMP modification.
I heard the government is providing a financial incentive to homeowners through HAMP. Is that true?
According to the Department of Housing and Urban Development, homeowners who receive a modification on their primary residence and make timely payments on their modified loans receive incentive payments. For every month you make a payment on time, you will accrue an incentive that reduces the principal balance on your loan. If your loan ceases to be in good standing (three monthly payments are due and unpaid on the last day of the third month), no further payments will be paid, including accrued but unpaid amounts. The incentive will be applied directly to your loan balance annually – up to $1,000 each year – and over five years the total principal reduction could add up to $5,000. This contribution by the Treasury is designed to help you build equity faster.
Could I end up with a balloon payment through HAMP?
Yes. If your servicer determines that a principal forbearance is required to get your monthly mortgage payment to an affordable level, the principal forbearance amount would be subtracted from the amount used to calculate your monthly mortgage payment, but you would still owe the money. You would have a balloon payment that accrues no interest and was not due until you pay off your loan, refinance or sell your house.
Will the terms and conditions of the permanent modification remain fixed for the life of my loan?
Once your loan is modified, your interest rate and monthly principal and interest payment will be fixed for the life of your mortgage unless your initial modified interest rate is below current market interest rates.
If the servicer lowered your mortgage interest rate to make your payments more affordable, your initial modified interest rate could be below current market interest rates. In that case, the initial modified interest rate will be fixed for five years, and the amount you pay each month for principal and interest will not change for those five years or 60 months.
Your new monthly payment will continue to include an escrow for property taxes and hazard insurance. Your monthly payment could increase or decrease if property taxes, homeowner’s insurance, or homeowner’s association fees change after the loan is modified.
How will I know if my loan can be modified?
Your servicer will work with you to help determine if your loan can be modified. Following this analysis, if you qualify, the servicer will place you in a trial period plan. A trial period is about three months in duration (but it may be longer depending on your situation). Once you make all of your trial period payments on time and meet any other trial period requirements, you will receive a modification agreement detailing the terms of the loan modification. Any difference between the amount of the trial period payments and your regular mortgage payment will be added to the balance of your loan along with any other past due amounts as permitted by your loan documents. While this will increase the total amount that you owe, it should not significantly change the amount of your permanently modified mortgage payment as that is determined based on your total monthly gross income, not your loan balance.
What happens if I am unable to make payments during the trial period?
Homeowners who are unable to make the required payments by the end of the month in which the payment is due are generally not eligible for a permanent modification. However, you may be eligible for other foreclosure prevention options.
I owe more than my house is worth. Will a modification reduce what I owe?
The primary objective of HAMP and other modifications is to help homeowners avoid foreclosure by modifying troubled loans to achieve a payment the homeowner can afford. Servicers may, but are not required to, offer principal reductions. You may be eligible for reduction of your debt by filing for Chapter 13 bankruptcy.
Do I need to be behind on my mortgage payments to be eligible for a modification under HAMP?
No. Homeowners who are struggling to remain current on their mortgage payments are eligible if they reasonably believe they are very likely to default on their mortgage soon (often referred to by loan servicers as “imminent default”). You will be required to document your income and expenses and provide evidence of the hardship or change in your circumstances.
How does the Short Sale work?
In a Short Sale, the homeowner sells the property for less than the full amount due on the mortgage. When a homeowner qualifies for the Short Sale, the servicer approves the Short Sale terms prior to listing the home and then accepts the payoff in full satisfaction of the mortgage.
How does the Deed-in-Lieu of Foreclosure work?
The Department of Housing and Urban Development states that with the Deed-in-Lieu of Foreclosure, the homeowner voluntarily transfers ownership of the property to the servicer in full satisfaction of the total amount due. The servicer may require that the homeowner list and market the property before they agree to a deed-in-lieu arrangement. In order for the Deed-in-Lieu of Foreclosure to work, the homeowner must provide a marketable title, free and clear of other mortgages, liens, or other encumbrances.