If you are in the process of selling your home because you can’t make your mortgage payments anymore, see the initial post in this series for more info.
We all know that this is a huge hot button in our country right now. Things are changing daily, and there is a bunch of solid, reputable information out on the Internet that can help – I won’t waste your time restating that. I’m just going to quickly bring up a couple things that most people we’ve talked to haven’t been aware of.
First, many people do not know about the Federal HOPE For Homeowners (also known as H4H) program. There are limitations and qualifications that you should read more about at http://www.hud.gov/hopeforhomeowners, but it is a good option in certain instances. There is a fact sheet and FAQs on that site, but keep in mind that you can talk to a live person fairly easily which I highly recommend. There is a map for contact information by state at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.
Second, BE CAREFUL if you are talking to anybody about doing a “loan modification.” There are reputable companies out there for sure, and this can actually be a good solution. But, where do you think many of the unemployed real estate and loan professionals went when the housing market crashed? Yep, straight into loan modifications, mortgage negotiation, etc.
My advice? Look for a company that will give you a money-back guarantee if they cannot get your loan modification approved. Not everybody will do this, and I think that is just plain wrong.
Sure, maybe they keep a nominal charge for processing, but you should get all or almost all of your money back if they can’t get you approved.
There is a pretty specific set of guidelines for loan modification candidates. They should be able to give you a pretty accurate feel just after asking you a few questions and “prequalifying” you, and shouldn’t waste your time just “giving it a shot.”
Just a few things that the typical loan modification programs requires:
- They usually require that you are already behind on your mortgage – 30, 60, even 90 days past due. I think it is interesting that you can’t head off the problem early and that you already have to be in really bad shape to have any chance at all. But, I guess otherwise there would be too much abuse…
- Typically the more “under water” (home value vs. existing mortgage balance) you are, the more willing they are to work with you.
- Most of the time they’ll only work with Adjustable Rate Mortgages (ARMs), and especially Negative Amortization Loans (aka “Teaser Loans”, “Neg Am”, “Pick-A-Pay”, “Payment Option ARMs”, etc)
- The worse overall financial position you are in, the better your odds. Your “position” can be based on many things, but they’ll usually look at the whole picture. For example, if you and your family are healthy, and just one person only recently lost their job…that probably isn’t enough for them to allow a loan modification to proceed. Extended unemployment, medical problems/bills, accidents, etc. are usually more common triggers for loan modifications.
So, do some homework to see if it is right for you, and again, be careful – there are some shady (and desperate) operators in this market.
By the way, I’m calling some of my old mortgage peers to find a good loan modification source for a personal friend. If you are interested, send me a private message and I’ll tell you what I found fairly soon. If I get enough good info on different sources, I’ll post it on this blog.
After the long, complex home value post last time, I’ll wrap this one up before it gets too long.
As always, please tell me what you liked or didn’t like about this post, I value your comments…
Scott
