Home Loan Modification Program

The New York Times published an article over the weekend that does a great job of personifying the struggles homeowners go through with their lender when trying to get a loan modification.

We’ve often talked to our clients about the difficulties they face with their lender when doing the modification on their own. And the long, muddled process explained in the article is probably reason number one so many people throw their hands up in the air and get representation to help battle their lender.

Some highlights from the article:

• In the beginning, the article describes a process that included “several rounds of mislaid paperwork and resubmitted forms.”
• Chase told the borrower she would not be reported to the credit agencies…she was.
• Chase approved her for a trial modification to become permanent after three on-time payments…she made 4 when no word came after three months. She eventually still got denied because of an income issue.
• After getting denied, she received a letter saying the modification was still under consideration. Then she got a call saying never mind, start over.
• She would call Chase and be told everything happening to her is common, then call again and be told it never happens.

Sounds like fun, huh? Would you believe, even with all that, a Chase spokesman said in the article that she’s better off for what the program has offered even though after a year, she’s barely any closer to a resolution?

An issue that continues to permeate the loan modification industry is fraud. A Los Angeles-based program called NeighborWorks has just been launched nationwide to further bolster efforts to help people avoid fraudulent companies.

Here are a few tips that should help you pick out a dishonest company.

• Never Agree to Pay Advance Fees. AMLG has long believed this to be a critical factor and does not charge advance fees. With the passage of SB 94, more businesses in California will begin to follow AMLG’s lead, but few companies have the experience AMLG does in doing it the right way.
• Your lender is the only place you should ever send a mortgage payment. A common tactic by some fraudulent people is to request you make out your monthly mortgage payment directly to them. AMLG will never ask you to do this.
• Watch out for “guarantees” and “promises.” The cold, hard truth about guarantees and promises is that there aren’t any. If anyone provides you specifics about the results they can obtain for you, that’s a sure sign you are dealing with a dishonest person. We have to negotiate with your lender. It’s time consuming and complicated. There isn’t a template anyone can apply to figure out exactly what your lender will grant. We can give you an idea of what to expect, but never a guarantee.

Below is an unedited letter sent to us by one of our clients. She wanted to share her experience with the thousands upon thousands of people struggling to stay in their home during these difficult economic times. Sometimes, it just helps to hear from someone who has been in this situation. Her name is withheld to protect her privacy.

---

Dear Future Customer,

When you are in the middle of a crisis where you are in the process or under the threat of losing your home the first thing you look for is help. When I personally experienced this threat I was able to turn to American Mitigation Group to provide me with understanding and relieve to provide the strength to cope with the financial challenges I faced.

My home mortgage was adjustable and the date for readjustment was just a few short months away. I had made over 50 calls to my mortgage company and received so many different answers of what to do and no results that I knew it was time to call in professionals that could save my home for foreclosure.

The very first person I talked to from American Mitigation Group was knowledgeable, understanding, compent and helpful. He put me touch with a personal home finance consultant that was able to answer all of my questions and provide me with the peace of mind that only comes from knowing that you have help to face the challenges and bureaucracy that you are forced to deal with when working to save your home financially. My loss mitigation manager held my hand through the entire process. She always a email and or a phone call away. She was understanding, supportive, prompt and knowledgable, without her I could not have stayed sane through this ordeal. I can not say enough about the dedication and support she offered me throughout this entire crisis.

Without the assistance of American Mitigation Group. I might have lost my home. Calling American Mitigation Group provided me with the peace of mind, the support and the professional help that I needed to save my home and provide me with a fixed rate mortgage that I can afford for 30 years.

Sincerely,

Rescued Home Owner

A recent visitor found our site by asking the question, “How late can you be to do a loan modification?” It seems like a good topic to discuss as more and more people are falling behind on their loans and not realizing that there is still time to get things fixed.

The quick answer to the question is that it doesn’t really matter. You can be 30 days, 60 days, even 90 days late on your mortgage and there’s still time to get a loan modification. Too often, someone gets behind and thinks they are completely out of options. It doesn’t help that there are companies telling these people to simply walk away as if nothing can be done.

What you can do

Get ahold of a loss mitigation consultant immediately. An experienced mitigator can get a lender to listen up and begin negotiating immediately, no matter how late you are.

Obviously, we prefer that you come to us as early as possible. For every day that goes by, our ability to successfully negotiate your loan modification declines. If you’re 60 days late, don’t wait for day 61.

NOTE: The information below is outdated and we have added new information in an updated post called How Long Does it Take to Get a Loan Modification?

One of the questions we frequently get asked is “How long will it take for me to get my loan modified?” While there is no one answer that is universally true, there is a general timeline that can be followed. Let’s look at the process step-by-step.

1. Securing help. The first thing you need to do is entirely in your own hands. You need to pick up the phone or submit an application online and get someone working on your behalf. There’s no time constraint on this other than you taking a moment to initiate the process.

Time it Takes: Immediately, but it’s up to you

2. Getting a full loan modification package submitted. We have a set of forms you can access once you speak with an AMLG loss mitigation specialist. These must be filled out and returned to us in a timely manner. We’ll help you anywhere you need it, but it’s largely up to you to make sure this gets done quickly. The most frustrating aspect of loss mitigation for us is when a borrower that we know we can help drags his or her feet on getting the information to us. Time is not on anyone’s side and any delays can end up costing you a successful loan modification.

Time it Takes: 1- 2 days if you are proactive about getting everything done quickly.

3. Internal auditing and underwriting of the file. Once your complete package is in, we will do an internal review to make sure everything is in and documented. We will not submit your package unless our mitigators are confident we have built a solid case.

Time it Takes: 24 hours

4. Submit file to be assigned to a mitigation specialist with your lender. Following our internal review, the package is submitted to your lender for assignment with one of their loss mitigation specialists. Depending on the lender, this can take up to a couple weeks so be prepared to for a waiting period.

Time it Takes: 3-14 days depending on the lender

5. Mitigation process and getting a decision back. This is widely variable. Depending on your lender, you may receive a decision within less than a month or it could take up to 60 days. The lenders that are properly staffed will deal with your loan modification request in a timely manner, while those that can’t handle the volume of requests will take longer.

Note: One of the biggest mistakes people make is trying to deal directly with their lender. We hear stories from people about trying for 3-4 months to get a decision and nothing ever happens. It doesn’t need to take that long and if it does, you need representation. Many lenders treat us differently than they do a borrower. The reason is that they know we are going to give them exactly what is needed and they can trust us to only bring clients that are solid candidates for a loan modification. A lender knows up front when they deal with us that they will spend less time working the account.

Time it Takes: Typically 30 – 60 days, but it depends on the lender and can take longer or shorter than the typical time.

6. Making the newly modified loan official. Once the decision is returned from the lender, you’ll have a clear set of new terms that you can either choose to accept or decline. Typically, the lender will give you your new rate, balance, monthly payment and date that the loan will be completed. Additionally, they give you a date you must sign and return the agreement by. If you fail to return the agreement on time, it may cancel your right to a loan modification so do not delay.

Time it Takes: 1-7 days depending on how quickly you return your signed agreement.

This is part 5 in our week long series on short sales.

Yesterday: Short Sale Candidates | Today: Short Sale Drawbacks

---

We’ve been talking all week about short sales and hopefully it’s helped you become more educated on the subject as you weigh your options. It’s important in any discussion to also give you the less positive side and that’s today’s topic. Below are some drawbacks that you should consider. Keep in mind, though, that when you get into a difficult situation such as not being able to afford your home, every option will have consequences and programs such as loan modification and short sale are generally the best solutions available.

A hit to your credit. The short sale phenomenon is pretty new and it’s hard to say with certainty at this time what the actual hit to your credit score could be. It is widely accepted, though, that it is less damaging than if you were to foreclose. Therefore, you should expect a quicker credit repair with a short sale.

You lose your home. In a perfect world, you would keep your home. With a short sale, obviously, you will be selling it. That can be a tough and emotional realization. However, in a situation where you have to weigh negatives against positives and make a “best-case” choice, having your debt potentially forgiven and being rid of a payment you may not be able to afford may be a favorable outcome.

It takes time. You have to remember that “short” references the sale being done short of the home’s value and not the time it will take to finalize. The process with the lender can be difficult and lengthy. Finder a buyer is never guaranteed. You have to be patient.

There may be tax implications. The Mortgage Debt Relief Act of 2007 largely rendered the tax problem inconsequential. It used to be that forgiven debt could be taxed as income until this law was put into action. It’s still possible that there could be tax implications, so you may be wise to contact a tax professional regarding your situation.

This is part 4 in our week long series on short sales.

Yesterday: Don’t Walk Away | Today: Short Sale Candidates | Tomorrow: Short Sale Drawbacks

---

Short sales are more popular than ever. One recent informal survey suggested that 18% of all listings are short sales. It’s a staggering number. So who are all these people with these listings and how did they qualify? Below are common characteristics of short sales candidates

• Home value has dropped. This is a classics short sale trait. The market has dropped off considerable and left thousands of homeowners with a mortgage debt that exceeds their home’s appraised value. It makes refinancing impossible and often times, a short sale is the best option if you just can’t keep the home.
• The mortgage has defaulted or will in the near future. While it’s more common to see a short sale approved when in default status, it’s becoming more common to see lenders approve a short sale earlier in the process to mitigation their future losses.
• The seller has a hardship. You’re much more likely to get approved for a short sale if you have a documented hardship of why you simply can’t afford to stay in the home and make payments. The hardship letter is an important document that should be carefully crafted. AMLG can advise you of how to do this.
• Simply can’t afford the home. If it’s just not possible to afford the home even with a loan modification, a short sale is the right option. It’s unfortunate if this is the case as no one wants to lose their home, but at least with a short sale, you can limit your credit score damage and responsibly reach an agreement that gets you free and clear of the situation.

If any of the above characteristics fit your situation, you should at least have a conversation with a professional about your options. Time can become a real critical factor and you need to stay ahead of the problem in order to reach the best possible resolution.

This is part 3 in our week long series on short sales. Today’s entry focuses less on short sales and more on an option that some turn to as an alternative.

Yesterday: Tax Implications | Today: Don’t Walk Away | Tomorrow: Short Sale Candidates

---

There’s a lot of talk about homeowners simply mailing in their keys and walking away from everything. There are many companies promoting walk away plans and sugarcoating them as if the effect on you will be minimal. In so many ways, walking away is just the wrong move to make.

• Your credit is significantly damaged. Lenders will look back about seven years at your credit history. Walking away will stay with you for a long period of time and dramatically affect your ability to own another home anytime soon.
• It will be quite some time before you can buy a home again. Mortgage giant Fannie Mae has publicly stated that they will not lend to anyone that walks away for five years and even then will require a 10% down payment and 680 FICO score. They will accept certain documented hardships that can lower the waiting period to three years.
• You have a responsibility to pursue an agreement. Your mortgage is a contract that you are supposed to honor. You should make every attempt to secure a loan modification or short sale agreement before giving up.
• Simply put, there are better options. Have you pursued loan modification? Have you considered a short sale? Why not? They are better on your credit and represent a responsible and ethical resolution.

Don’t be fooled by companies that promote walking away. So many of these businesses are making it sound like the perfect solution and trying to convince you the effect will be minimal. We encourage you to read the following two articles from the San Francisco Chronicle and NPR respectively. They have some valuable information about why you shouldn’t walk away and shed some light on companies that promote such an action.

Fannie warns homeowners who walk away
Why Not Just Walk Away from a Home?

This is part 2 in our week long series on short sales.

Yesterday: Short Sale Popularity | Today: Short Sale Tax Issues | Tomorrow: Don’t Walk Away

Note: The following does not constitute tax advice. It is only meant as an overview to give you a starting point to learn more. If you need tax advice pertaining to a short sale or other loss mitigation service, you should consult a tax professional.

---

It wasn’t too long ago that a short sale meant a heavy tax burden. A homeowner would have their debt forgiven by the lender (good), but be on the hook for taxes on the thousands of dollars in forgiven debt (bad). The IRS was looking at it as if it was income – kind of hard to accept taxes on phantom income, right? This was hindering borrowers from getting the help they needed as they were simply creating another problem.

Fortunately, the Mortgage Forgiveness Debt Relief Act of 2007 was passed and forgiven debt became much less likely to be taxed. The enacted law is not permanent and only creates a three-year window beginning back on January 1, 2007 and ending December 31, 2009. It could potentially be extended if the need is still there.

With this hurdle cleared, a short sale makes a lot more sense for homeowners and the volume of activity has picked up tremendously. If you think you might need a short sale, consult a professional and find out if you qualify.

This is part 1 in our week-long short sale discussion.

Today: The popularity of short sales | Tomorrow: Bye, bye heavy tax burden, hello debt relief

---

Short sales are becoming wildly popular as homeowners look for something to mitigate their losses. What is it that makes this such an attractive option?

The setup

When times were good in the early to mid 2000s, loans were increasingly easy to get. Lenders opened up programs that allowed borrowers to qualify for loans that equaled 100% of the value of the home. Believe it or not, there were even programs that allowed for loans to exceed the home’s appraised value. After all, a home can only appreciate in value, right? Eventually, the home would be worth more than the loan, so what’s the big deal? Top that with the fact that many of these loans were given to unqualified borrowers “stating” their income. What’s more, these loans were often done as three and five year adjustable rate mortgages. Done the right way, none of the above is inherently “evil,” but when given out like candy to everybody that asks, it can spell disaster.

The result

What do you get when you combine 100%, interest-only adjustable rate mortgages with a market that couldn’t hold up? A lot of upside down homeowners. A $300,000 home with a $300,000 loan that becomes a $250,000 home while a borrower makes interest only payments becomes a likely candidate for foreclosure, especially when the homeowner’s ARM expires and adjusts to a rate that makes the monthly payment hard to afford.

A Better Option

A short sale may not allow for you to keep your home, but it does mitigate your losses and provide a “best possible outcome” scenario. While data is still sparse, it’s widely recognized that a short sale is less damaging to your credit. It’s also common for the lender to forgive your debt that accrued from a loss in value. Perhaps the biggest boost to short sale popularity was the passing of the Mortgage Debt Relief Act which temporarily stopped the IRS from taxing forgiven debt. Wouldn’t you like to be off the hook for that mounting debt, not have to pay exorbitant taxes on it, and limit your credit damage?

Short sales are especially attractive to those that hold an investment property such as a rental or vacation home. When you watch that property lose value and it becomes an unnecessary burden, getting rid of it is ideal. Of course, selling it at a price you need to recoup your losses is impossible. By applying for a short sale, you could potentially drop the price to a reasonable level and not be on the hook for the difference between value and loan balance.

What’s happening in the current market

A recent informal poll of the National Association of Realtors suggested that 18% of all home sales were of the short sale variety. As previously mentioned, data is still pretty new in this arena, so there’s not a lot else to go on. Many lenders are reporting huge increases in short sale activity. It’ not uncommon to see reports of a lender doing more short sales in one month than they did in all of 2007.

We’re likely to continue seeing dramatic increases in short sales over the coming months. Don’t get the idea that it’s easy, though. Not everyone qualifies and lenders aren’t just stamping “approved” every time someone applies. Consult a professional for a consultation.

Tomorrow: A deeper look at how the Mortgage Debt Relief Act has affected short sale activity.

We’re going to take a look at the short sale market all next week. The program is growing rapidly as more and more people are finding it’s the best option they have with their property. We’ll take a look at everything from what a short sale is to the type of borrower that should consider a short sale. The lineup is below:

1. Monday – Why short sales are so popular
2. Tuesday – Is your short sale tax free?
3. Wednesday- Why you don’t have to walk away
4. Thursday – The typical short sale candidate
5. Friday – The negative side of the short sale

As programs like loan modifications and short sales grow in popularity, a good question to ask is why some people are given a loan workout while others are denied. A big part of it is that people don’t know how to negotiate with a lender and do the wrong things on their way to being denied. Another aspect is going after the wrong program. Each borrower is unique and has certain things that will work and others that won’t.

Loan workouts take more than just asking nicely. You have to craft a picture that includes finances and hardships. It has to presented to the lender in such a way that convinces them to work something out.

With that said, there are some principle things to consider on your way to working out a solution.

It’s about the money

The first thing you have to realize is that it’s all about the bottom line. A lender is willing to work with you on a solution if it makes sense to their own bottom line. It sounds harsh, but it’s the truth. The good news for borrowers in trouble is that foreclosure is expensive to the lender and more times than not, they consider it an unfavorable outcome. That leaves a litany of other workouts that a lender is willing to negotiate. Short sale, short refinance, loan modification, deed-in-lieu of foreclosure and forbearance are all common loss mitigation programs that have their own pros and cons. AMLG focuses on the first three as preferred programs.

It’s about your ability to pay

Your finances are going to be front and center in any potential loan workout. The lender wants to know where every penny is coming from and where it’s going to end up. If they are to offer a workout for your situation, they want to be sure it’s a worthy investment. There are some things you may want to cut out from your monthly bills:

• Excessive vehicle payments (less car is a good idea)
• Cell phones
• Cable TV
• Restaurants
• Inessential purchases

Stick to the necessities. Lenders want to see you making a serious effort to find room to make your monthly mortgage payment.

It’s about where you live

In places where it’s harder to sell homes on the market (California, Florida, Nevada), chances are better of a loan workout agreement being reached. Why? Because if a lender ends up with the deed to the home, they have to sell it to recover their investment. If the home can’t sell, they’re stuck. That’s guaranteed incentive to get a solution worked out. Lenders are acutely aware of market activity and will know what is and isn’t working in certain regions.

It’s about your commitment

No doubt, a situation where you can’t pay your mortgage flat-out stinks. If you can face the fact you need help and are going to have to make some sacrifices, you can probably working something out. If you’re in denial and unwilling to realize that times have changed, you could be in big trouble. Be willing to humble yourself a little bit. A strong commitment to getting things fixed will go a long ways toward getting you back on track.

Struggling to pay your mortgage can be a difficult thing to cope with. Many people choose to bury it and hope a solution presents itself or it just goes away altogether. Meeting the issue head on and admitting you need to do something can be hard, but you’ll be glad you did.

As the housing crisis worsens throughout the country, more attention is being paid to getting assistance to those in need. Programs such as loan modification and short sales have grown in popularity and lenders are ramping up those departments to handle the volume of requests. We are providing a service that lets you be proactive about your situation and find a solution before you’re out of time and options.

We mention all this to assure you that there is help and there are things you can do about your situation, but you have to want help. We find too many people that don’t realize the urgency of their situation or aren’t willing to admit they need to do something.

Those who fail to take action often times meet with the direst of circumstances and become another number in the housing market crisis. Don’t let that be you.