Tag Archives: modifications
Why So Many Loan Modifications Fail and How to Seek Help
For millions of homeowners struggling to pay their mortgage, many are faced with falling home values which makes it hard to either sell or refinance. Therefore, many homeowners make the painful decision to simply walk away rather than fighting to stay afloat and keep their home. Financially speaking, it does make a lot of sense for many underwater homeowners to walk away or short sell because for some, it may take them many years to break even and start to have positive equity. However, not everyone falls in this category. The reasons are many, such as: (1) if you are planning to hold on to your house for a long time, you could break even and then start to have positive equity again; (2) perhaps you have personal goals to hold on to your house because you enjoy having your family living in it. So just because lots of people are walking away does not make it the right answer for everyone. This would be similar to doing what everyone else was doing during the bubble, which was to buy a house because everyone was.
In an effort to help some of these homeowners who wanted to save their home, loan modification programs have become one of the primary rescue effort. Loan modifications help make the mortgage payment more affordable so that people can keep their homes.
Unfortunately, these programs can be very challenging and at times fail to help the homeowners because the process to qualify for one and get approved for one is super complicated.
On one hand, banks make the process very difficult. In fact, some research shows that it was much easier for most people to obtain mortgages when they purchased their homes than it is now to apply for loan modifications. Many believe that banks do not have the proper infrastructure in place to deal with so many loan modification applications. Other believe that the banks are giving people the run-around on purpose.
On the other hand, they are lots of people who apply for loan modifications the wrong way not adequately knowing what they are getting into, or what will be expected of them. They submit their applications and wait for months hoping for the positive answer. Well, for most people, and this is a sad but true fact, if they are not financially pre-qualified they won’t get a positive response. What homeowners need to do is not only demonstrate to investors and lenders that modifying their current loan is more cost-effective than foreclosure, but that they are able to make the new modified payment.
So instead of applying unprepared, it would be better to know ahead of time whether you could qualify for a loan modification. This is vital to know because if you don’t qualify for the new terms, then the modification could be denied, anyway. And if you are not pre-qualified, perhaps fine-tuning your budget, i.e. lowering your debt, taking the train instead of owning the car, could help you get qualified. The decision whether to apply is 100% up to you, but having guidance can save you time and money, and increases your chances of approval for a loan modification. So here are some of the pre-qualification criteria that are considered crucial and this is where you need guidance with:
1. Your front-end debt-to-income ratio must be above 31% of your gross income prior to the modification.
2. Your house target payment, also known as PITIA (principal, interest, taxes, insurance, and association dues), has to be lowered to be at 31%-38% of your gross income after the modification in order to meet the HAMP guidelines. This is done in three steps. (1) Your house payment target is achieved by lowering your interest rate to no more than 2% with a 30 year loan term. (2) If the target is not reached, then your loan term is extended up to 40 years in order to try and reach the new house target payment. (3) The third step is to either provide you with a loan forbearance or a balance reduction if the target payment is not reached in steps 1 and 2. And this is the tricky part. There are relatively few loan modifications that have received a balance reduction. Additionally, as far as the forbearance option goes, this is very relative to your case; there is no size fit all, basically, the loan modification program guidelines do not give one percentage forbearance ratio for everyone.
So now you are wondering if you should become a mathematician in order to figure all the ratios and calculations involved in a loan modification. You sort of do if you are going to figure it out on your own. The alternative option is to seek out help where you can get unbiased, conflict-free analysis for your loan modification potential.
To learn more, please visit the
Bank of America Loan Modification Modify Your Loan Today
If you are looking for a Bank of America loan modification, you need to read this article. These loan modifications are not as hard to get as you might think and they are definitely easier to get than most other lenders. So how much can you save off your monthly loan payments? You can find out today!
This program is pretty amazing. As Bank of America works towards getting all of Countrywides files merged over, they are also aggressively pursuing loan modifications for those who qualify. You may have seen in other stories how they actually doubled the amount of modifications they said they were going to do thus far, which is outstanding if you are in need.
Not everyone is going to qualify, let’s make that perfectly clear. They are not going to do a million loan mods every month! But, if you are struggling to make your payments and your interest rate is higher than average, you have a pretty good shot. There has to be a definite hardship though. If you are cruising along just fine and want to lower your payments or reduce your principal loan balance just because, it’s not going to happen.
This brings up a little side note I’d like to make as well. Everyone I talk to these days is concerned with getting a principal reduction. You hear things such as “Bob just got the same size house as me down the street for half the price, Im going to skip a payment and try to get a principal reduction!” This is a BAD idea. Why screw up your credit for a snowballs chance? If are struggling to make your payments, who cares about a principal reduction! You should be concerned with a payment reduction. This is accomplished by lowering the interest rates, lengthening the terms of the loan and then, maybe a principal reduction. If you lower the interest rate from 8% to 4.5% and extend the terms from 30 years to a 40 year loan, you are going to have a nice payment reduction. Hopefully, a payment you can afford.
So, back to the program. The deal with loan mods in the past has been you either gut it out yourself or hire a company and wait 2 to 3 months to get something accomplished. Now, you can use a company to find out if you are approved for a loan modification, what your interest rate will be and what your payment is going to be. Talk about a guarantee! All this is performed with no obligation to move forward, so if you don’t like the terms you don’t do it. Simple as that.
If you are looking for a Bank of America loan modification, just visit the site below and see if you qualify for this program.