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Mortgage Refinance or Modification

Updated on January 12, 2016

Do you need a Refinance or Modification

Mortgage Remedy or Just More Worry

The Obama Administration since the mortgage meltdown has implemented what is suppose to be a refinance option and modification procedures to help those who are in trouble with their ability to either sell their property at what the amount of their principal balance is more than the value and those that are having a difficult time making their payments due to some life hardship, such as loosing their job. Let me give you the criterion that is necessary to make this happen for you.

Home Affordable Refinance Guides:

  • 1 to 4 unit dwelling
  • Loan must be owned or guaranteed by Fannie Mae or Freddie Mac
  • Must be current with your present mortgage payment **no late payments within the past 12 months
  • Mortgage balance must be about the same as the value of the property or less *you may be eligible if your first mortgage does not exceed 125% of the current market value of your home

Home Affordable Modification Guides:

  • Must be your primary residence
  • The balance of your mortgage cannot be greater than $729,750
  • You must be able to prove that you are having difficulty paying your payments to include; a reduction of income, loss of job, increased expenses, increase in mortgage payment. A hardship of some kind with documentation to prove it.
  • Your must have closed on your mortgage loan prior to January 1, 2009
  • Your payment including principal, interest, taxes, insurance, homeowner’s association fee, if applicable; must be greater than 31 % of your current gross income

These guidelines will help you know if you can first meet the standard requirements for the programs. The mentioned qualifications are not conclusive regarding loan documentation; as you must submit all normal documentation for your financial status.

The modification has been a very slow process. From review of so much information on the web, it is said that it has taken over a year for some to just get to the trail period of the modification. From some applicant’s point of view the lenders bend over backwards to make sure the government’s requirements are followed to the letter and they are not giving the applicants as much consideration as maybe they should. It is taking months on end to get these modifications ready for signing. I have read that some of these people who were very delinquent wound up going into foreclosure anyway. I am not being non-supportive as this has been all over the web, here and there. The modification process allows you a three month trail period in which you make the trial payments, if you make the payment satisfactorily and your income, assets and financial situation has not changed (it is verified again); they will eventually get the final modification ready for your to sign, at a lower rate and payment amount. It also has will allow some principal reduction for the first five years of the modification if you pay your payment as agreed. This is something like one thousand dollars per year.

This can be a very good way for the people who are about to loose their home, recover to some extent, without foreclosure. The only issue is time and it has stressed a lot of borrower’s with the time frame they are taking to get to the final stage for the trail period. President Obama has actually stated in the news that the lender’s were not making or closing enough of these modifications to help those distressed borrowers. I am sure this might put a strain on the lenders to some extent but I am not able to identify with this frame of getting the paper work done. When I was in mortgage underwriting, we did whatever we had to do to get loans approved at the end of the month and it was usually the month they were submitted to underwriting. So if I seem unsympathetic with the length of time they are taking for approval, I beg your forgiveness. . The consumers deserve better.

I have not been made aware of how long the refinance transaction are taking and have not talked to anyone who knows about this options. If you need help, take a moment to see if you meet the criterion above, get your documentation together and call your mortgage servicer. They have a duty to help you through this process.

Saving you home is important...
Saving you home is important...

Some Additional Insight

 If you do not qualify for one of these options, you may find other arrangements to help with your mortgage loan payments.  I have no guarantees for you but there are forbearance agreements, repayment plans and alternate options the lender/servicer may have.  With the economy in the distress it is in, they may find a way to help you through a crisis.  It is important that anyone who is needing help try to find it before they get into deep trouble and become delinquent.

It is equally important to keep your credit as clean as possible.  There is no perfect fix for anyone who has lost their job except finding another one making as much money a they did.  In this period of our history, a lot of people are hurting from increased housing payments, loss of job, higher expenses.  Seeking help is sometime painful but it is nothing to be ashamed of, you are not alone and hopefully you will find help, a job, a higher salary, reamin healthy. 

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