Joanna Jensen, Real Estate Pro in Livermore, CA

Do Agents know criteria for home owners who are facing a financial hard ship? As an Realtor can you tell what home owners qualfy for a modification

Asked by Joanna Jensen, Livermore, CA Sat Sep 25, 2010

Many realtors ,when faced with a home owner who is upside down in the value of their home and facing a financial hardship, Do you know when to suggest a modificaiton vs short sale?? What do you tell owners who would like to keep their home

Help the community by answering this question:


there actually are programs now for home owners who are unemployed and on unemployment.
if their first loan is below $729950 they may qualify for a hamp loan mod as well as getting help with a few months of payments.
California is considered the hardest hit and you may be able to get help for free if you are unemployed. I believe you get a few months of mortgage payments.

I know the word is out there not to pay for help however some home owners do not know what is a good offer and what to do when the lender will not help them.

making home affordable .gov is an exellent resource.
Web Reference:
0 votes Thank Flag Link Tue Mar 15, 2011
Hi Joanna:

The loan modification formula is simple. 31% of annual wages of the borrower(s) is the lowest payment loan can be modified to by many lenders for 1st deed of trusts only. So as long as the home owners payment is above that they stand a chance based on hardship to lower their payment. Otherwise they keep on paying at current amount.

Now, if they do not have a job at all and there is no income, the modification is not possible either.

For short sales, make sure there is hardship otherwise short sale approval is tough.

Amit Inamdar, MBA, Broker
Home Loans and Sales under One Roof
CA DRE #01355522, NMLS # 236574
Own Sweet Home Realty
0 votes Thank Flag Link Fri Feb 11, 2011
Actually, you can still do a modificaiton is you have equity.
example. Home owner has a first that is $729,000 and a second loan they are current and not upside down.

they do qualify for a mod because 1)
they live in the home
2) the first loan is below $729, 950
3) they obtained the loan before 1/1/09
4 their payment for the first loan principal interest taxes and insurance is more than 31% of their gross income. Equity doesnt have anything to do with it. Hardship does.

Being current is fine. You can still do a modificaiton on a 2nd home or rental home as well.

Lenders do want you to submit a workout package at least 10 days before the foreclosure sale date however you can submit one later than that your risking not getting looked at because I believe the lender is not required to stop the sale if you wait that long..
0 votes Thank Flag Link Wed Oct 20, 2010
If the hardship is short term they should go for a modification or a forbearance. If the hardship is likely to last for some time, they should try for a short sale. It's pretty much that simple. The qualifications for short sale and loan modification are very similar. There is one major exception, ability to make the lower payment.

As far as paying someone to help with the loan modification, I have heard horror stories from every source, people who tried to do this themselves, people who used the government approved 'free' services (remember, you get what you pay for!), people who used attorneys who CLAIMED they knew how to work with the banks, and people who got scammed by so-called loss mitigation companies. But I have heard good stories as well, mostly from people who used a for profit loss mitigation company. In fact, the ONLY happy endings I have heard came from people who paid for the service.

There are no 'pat' answers. But I will say this, no matter who a homeowner uses to modify a loan, they need to keep a careful eye on them and track the deadlines themselves. The banks don't make it easy, for anyone!
0 votes Thank Flag Link Wed Oct 20, 2010
Most want to keep their homes but modification and short sale are just 2 out of several other options that should be explored depending on their financial situation, type of loan and if they have junior liens. Some may need a special forebearance until they find employment, others may have their mortgage payment at 31% ratio but have a lot of personal debt that needs to be renegotiated or eliminated, etc. Unfortunately most homeowners take the emotional approach to their situation which is doing whatever it takes to save their home even if they lack control over their current financial situation. As a Realtor I completely understand and have compassion. I have personally gone through a worse financial crisis than the ones most families that come through my office are facing. But it's also my duty to let them know that there is also a financial decision that needs to be made. Looking at it from that point of view many who will or have received a loan modification will still have negative equity in the next few years as opposed to doing a short sale and making a sacrifice to rent at a lower monthly payment, save money, get back on their feet, re-establish credit and be able to buy in 2 to 3 years for less than what they owe now. Sadly, many decide to pay an average of $2,000 in fees for empty promises.
0 votes Thank Flag Link Wed Oct 20, 2010
The answer is that according to the financial hardship homeowners are facing currently, and their income (employed, unemployed) and level of expenses, they may qualify or not for a loan modification under the current guidelines. If they do not qualify, because they have either too much equity (believe it, still happens), or they have too much income or too low income either one, or they do not have a real hardship to justify.
If they are in one of those situations, then they will not qualify for a loan modification, and their available options are getting less and less, one of them is to do the short sale of their property and walk away with less damage to their personal credit and one debt less.
There are many available non-profit organizations doing loan modifications for free under the Obama guidelines, but according to consumers they take too much time to complete the negotiation with lenders, then they get frustrated. That is why, some homeowners decide to pay companies who specialize in processing loan modifications. I know one that is local and with excellent reputation, that I can direct your clients for a possible oan modification.
0 votes Thank Flag Link Wed Oct 20, 2010
There's lots of good information about home modifications online by a website directly from our government! Check out Note that the website ends in "gov" so you know this is not one of those unscrupulous people trying to take advantage of people. If you are employed you have a chance to get a home modification. If you actually have some equity and credit, you can call your bank and they will work with you to reduce your interest rate. This website talks about the process, and will map out the procedure to try and modify your loan, and if you are not eligible for that, your other options. Best, Terry Bell, Realtor, Sonoma Country Wine Country, California, CPS Real Estate
0 votes Thank Flag Link Sat Sep 25, 2010
The best thing for a home owner is to call their lender to try work out a loan modification. Home owners should not pay money to a company to modify their loans. I heard horror stories about people in financial hardship paid $4000-5000 to companis that claimed that they will modify the loan and did not work, they took the money though from the home owners. That left the borrower in more debt.
If the bank did not approve a loan modification, then they better do a short sale after they consult with their CPA, or tax attorney. Short sale is for a home owner on their primary residence and has to be in a financial hardship.

Heba Rayan
Tel.: 925-216-3006
Fax.: 925-208-2933
Department of Real Estate
DRE License # 01722870
0 votes Thank Flag Link Sat Sep 25, 2010
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