New lenders modifying loans through Making Home Affordable:

• Allstate Mortgage Loans & Investments, Inc.
• AMS Servicing, LLC
• Central Florida Educators Federal Credit Union
• Central Jersey Federal Credit Union
• CUC Mortgage Corporation
• EMC Mortgage Corporation
• Franklin Credit Management Corporation
• Glass City Federal Credit Union
• HomEq Servicing
• Horicon Bank
• IBM Southeast Employees Federal CU
• Lake City Bank
• Metropolitan National Bank
• Mortgage Center, LLC
• Oakland Municipal Credit Union
• OneWest Bank
• ORNL Federal Credit Union
• PennyMac Loan Services, LLC
• Schools Financial Credit Union
• SEFCU
• Servis One Inc.,dba BSI Financial Services, Inc
• Stanford Federal Credit Union
• U.S. Bank National Association
• Vantium Capital, Inc.
• Yadkin Valley Bank

The modification took over 8 months to achieve but the results are stunning. Not only did he keep his home while we were working the case, we secured him a new monthly payment of $1,300.72. That’s a savings of $964.28. He only has to pay one month’s mortgage payment to the lender to get reinstated and the rest of the $27,200 owed to the lender has been brought current and placed at the end of the loan.

We tell clients all the time, be patient. It’s not easy getting a loan modification and lenders are tough to work with. This is a perfect example of what can be achieved with hard work and patience.

1. Lender Contact Information. This section will forever be a work in progress as we keep up with the day-to-day changes in the industry. Right now, we have nearly 60 lenders and servicers listed. Some are out of business, but we try to point you in the right direction if this is the case. We are in the process of adding more detailed profiles and a comment section for each lender so you can share your experiences.
2. Making Home Affordable Plan. When the Obama Administration announced this plan in March, it was hoped it would provide relief to millions of homeowners. Now, we provide resources on our website for you to find out more about the program and whether or not you are likely to qualify.

We will continue to bring you more and more resources to help with your loan modification process.

1. Each lender has different policies and approaches

Some lenders will work with you, some won’t. The process with one lender can be very different from the next. Perhaps you think you understand everything you need to do, only to find out that your specific lender has different guidelines. What happens when you take the wrong actions? It could cost you your chance at successfully negotiating new loan terms.

2. Lenders are not going to make this easy

A lender is already leery of your ability to pay your mortgage because you have missed payments. They are going to be detail-oriented when considering your application for a loan modification and will want hard proof that you will be able to handle the new terms. In other words, you’ll need to dot each ‘i’ and cross every ‘t’.  Can you say that in conducting your own negotiations that you are confident you have done everything the lender requires?

3. The negotiation takes some expertise

Say you were having car troubles and couldn’t get your vehicle to start. Would you dive in to the engine yourself and fix the problem? Probably not – more likely, you’d take it to a mechanic who is trained to fix such problems. We all have our niches of expertise and loan modification is no different. There are subtle tricks and issues that can have a huge effect on your loss mitigation success. A negotiator that has been working with lenders for years isn’t going to get tripped up by during the process. Rather, they will be able to smoothly maneuver through the process and avoid critical mistakes that could cost you dearly.

4. Time is critical and none of us have enough to spare

In case you somehow missed it, there are only 24 hours in each day. Between work, family, social responsibilities and everything else life throws at us, do you have the time required to accomplish a mortgage loan modification? Probably not. There’s no getting around it, you will have to spend some time figuring out your financial picture and discussing your situation with your negotiation specialist. But that’s it, really. The rest can be left to the professional you hire who will be charged with staying on top of the process until a solution is reached. This leaves you free to deal with the other aspects of your life while someone makes sure your home stay, well, yours.

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

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.

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.

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.

You have an impending rate hike on your ARM

You may not be feeling the trouble yet, but you could. If your adjustable rate mortgage is scheduled to reset, it could be at a higher interest rate that makes your home unaffordable with the current mortgage. It’s wise to prepare for this and have options ready if it gets to a point where you can’t afford the loan payment.

You’ve tried to refinance and can’t

A lot of homeowners in this market are finding that lenders aren’t willing to approve a refinance of their current loan. The result is you are stuck with a loan that you either can’t afford or won’t be able to in the near future if an ARM resets to a higher rate. Loan modification is a strong alternative to refinancing that allows you to change the terms of the existing loan without having to refinance

You’re just barely getting by

Perhaps you’re managing to pay the mortgage, but are having to skip other bill payments. Your mortgage could potentially be modified to give you relief and allow you to get back on track.

The best way to approach a loan modification is to get started on the process early. You should have a conversation with a specialist that can advise you what course of action to take. The people that have the easiest time getting help are the ones being proactive.