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By Joanna Jensen | Real Estate Pro in 94566
  • Do you Owe More than your Home is Worth? Want to know your Options? You have several, Believe it or not.

    Posted Under: Market Conditions in California, Financing in California, Foreclosure in California  |  January 6, 2011 9:50 PM  |  577 views  |  No comments
    New Principal Reduction Programs

    Short Refinance for Owner Occupied Non FHA Loans

    Principal Reduction Option for Loan Modifications to get to 31% of Gross Income

    We have new options for Home Owners who Owe More than their Home is worth and are facing a financial hardship.  

    Two New  Programs.  One is a Short Refinance Program for clients who are current with Negative Equity.  

    this may only be for a small number of people.  

    1 : for home owners who have been responsible and are Current. 
         you live in your home.
         Your underwater on your First loan by a minimum of 10%  
          The first loan is not insured, not FHA, Freddie or Fannie.
          your credit score is a minimum of 500
    For the second Principal Reduction Alternative it is a new program for modificaitons

    this is a new addition to the Hamp Modification.

    There are very specific requirements here as well.

    Must be Owner occupied.
    You do not have to be current.
    Not a refinance  your credit score doesnt matter
    Here the lender uses a combination to get you down to 31% of your gross income for your FIRST mortgage.  This is where some people get confused.  When you qualify for the Making Home Affordable Modification your not including the payment on the second loan only the first.  If you have an interest only loan you do have to include the fully amortized payment to include interest principal taxes insurance and any home owners association dues.    

    Only those who are on the Mortgage need to include their income on the application.  

    The lender will reduce the principal balance if needed to get the home owner down to 31% of their gross.  The lender will not reduce the balance below the current value.

    Also they will not reduce the balance for three years!! This is to make sure they are not writing off anything and the home owner sells and makes a profit.  so you have to earn it.  After a few years of paying on time you get your principal reduction credit!! I think it is a good idea.  If the homeowner truly wants to stay in their home they shouldnt care about it taking 3 years. 

    Think about it,  If we loaned some one money and they asked for a credit to be given and we gave a credit but they they turned around and sold and immediately made a profit I would be mad!!!

    So those are  the new programs in a nut shell.  

    I do my Loan Mods and short sales a little differently.

    The lender is required to include a few documents in their package which our Law Firm includes in our package.

    Another thing to think about.  If your working with your lender or know someone who is.

    Typically if your asking your lender to forgive you money that is owed they are going to want to know that your reducing your spending as well.  They will look at your discretionary spending.  

    If your current and you meet the criteria for the program they look to see how much money you have in liquid assets.  The lender wants to see if your facing a financial hardship.  

    You can not be required to touch your 401k however if your able to continue to max out your 401k the lender may think your not facing too much of a hardship.

    If you have a mortgage payment of $6000 (fully amortized)  per month and have $24,000 in your savings (readily available)  thats not including your 401K which will not get a penalty the lender may say your not facing a hardhship.   this is if your current.  

    Basic guidelines for the making home affordable program are

    1) you live in your home and it is your principal residence
     2) you obtained the loan before 1/1/09
    3) the fully amortized first loan payment is more than 31% of your gross income
    4) your loan balance is less than $729,950.

    These are the guidelines.  You can have equity, you can be current or late.  

    You are much better off if your current now!!! You have many more options being current. 

    Happy to help if you have questions.  

    JoAnna Jensen
    Legal Assistant - Realtor
    Volo Law Group - Legal Realty 
    925 699 5041 
    866 757 8739
    925 520 4918 E-Fax 

    Ask me about 

    Streamlined Refinance for Underwater FHA loans,  Short Sales,  Traditional Purchases and Sales 

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