Tuesday, February 17, 2009

Modifications really are the best option

I just came across Government Refinance Assistance, a resource page listing the best options for refinancing and or FHA options for homeowners that are caught in the housing market crisis.
The 3rd best option listed when criteria is not met for the first two is loan modifications.

I haven't heard very much negativity toward loan modifications. Essentially because they are pretty cut & dry. Of course there will always be some type of negativity surrounding anything new. That is the role of the skeptic. I, too, didn't jump up & down gleefully.. or like a chipmunk who just found their winter stash when I first heard about them. I did stop what I was doing to listen.

A year ago, working in the lending/finance industry, the idea definitely intrigued me. I wanted to understand how & why all lenders could negotiate or modify their these loans now.

As foreclosures increased, and the bottom was falling out among hundreds of lenders nationwide, one could see the value in modifying loan terms and realize the saving grace they really provided.

The modification strategy is typically designed for homeowners struggling to pay their mortgage, not for those who can pay their mortgage or are eligible for a refinanced loan.

(excerpt taken from "Is a Mortgage Modification For You?")
"A mortgage is one of the most complex transactions there is. A loan modification is also a gray area for a lot of people. So of course people need someone to walk them through the process to tell them this is what you need and this is what you don't need," said Ginna Green, spokeswoman for the California office of the Center for Responsible Lending in Oakland.

Is a loan modification for you?

Greg Pennington, a San Francisco-based mortgage banking consultant and counselor with Parker-Pennington Enterprises, says a loan modification isn't for everyone.

A loan modification may not be viable if:

* The modified loan comes with payments you still can't afford.

* Your current interest rate is already low and there's no room for the lender to lower it further.

* You can make the new payments, but the mortgage balance is greater than the value of your home and you don't plan on staying put long enough to reverse the loan-to-value imbalance.

* You have not already missed payments on your mortgage or can't show financial hardship due, say, to job loss, pay decrease, illness or interest rate increase.

* You have other properties, investments or assets that could be liquidated to cover your mortgage debt.

* A short sale (The lender forgives a portion of the debt owed if you can find a buyer), bankruptcy, auction sale, refinance or other approach, short of a foreclosure, is a better option.

"You can do a loan modification and not be aware of where you stand. You can get a loan modification for a home you don't want to be in," said Pennington.

A financial, housing or credit consultation can help you determine your best option. Just be prepared to hold down the fort for the 60 to 90 days or more it could take to complete the modification, due to potential complications and document processing times. " www.realitytimes.com

No comments: