The only loan modification program available in which lenders reduce principal is FHA"s Hope For Homeowners. Under the program, lenders may receive an FHA guarantee if they reduce the balance of the loan to 90% of appraised value, and if the borrower qualifies for the other criteria.
1.) Lenders have informed Congress several times they are not interested in Hope For Homeowners until every other modification program is attempted.
2.) HUD reports that out of the 400,000 or so homeowners they expect the program to aid, fewer than 230 loans were started by end of 2008 and ZERO closed.
3.) A lot of mortgage brokers are soliciting borrowers for loan modifications using Hope For Homeowners. Unless you are working DIRECTLY with your loan servicer, any offer made to you to reduce principal balance is unenforceable.
4.) Under no circumstances should you pay any fee whatsoever for a loan modification until the modified loan closes. In many states the practice of collecting advance fees for loan modification is illegal. California has special licensing rules. Federal law makes it illegal to collect an advance fee in connection with an offer of an extension of credit if the offeror implies a guarantee or implies "substantial success rates" the credit offer will be approved.
Be very careful. California is rumored to be investigating hundreds of loan modification companies for fraud. The Fedsare overwhelmed with complaints. Contact your lender directly or hire an attorney who specializes in real estate matters. Assume anyone who solicits you for a loan modification is interested in one hing only: getting a fee out of you.
As for the truth in their example why would a lender gift the person going into forclosure 45,000.00 in equity? If the appraise value is 375,000.00 I can not see a lender agreeing to rewrite the loan to 330,000.00 it just does not make sense.
So TJ is correct as well. The added notion of a lender, RE broker and a mortgage loan specialist putting a migrant worker earning $2,000 a month into a 100% CLTV mortgage obligation and upwards of $1.0 million home is equally if not more absurd. The fact the trustors (B-o-r-r-o-w-e-r-) here had a 760 score allowed the three parties to use Cart Blanche to create a predatory loan. Commissions $$$$$ Commissions $$$$$ Commissions $$$$$ I donâ€™t know the circumstances for the above question. I believe the civil suits and damages award for the foreclosure victims against the three parties mentioned could really add up.
Forget the brokers â€“ their escape latch for the criminal acts of the other Big Three from (2004 through 2009, yeah â€“ itâ€™s still going on). We actually like brokers â€“ put canaries in a cage and they all start to sing! And what stories they tell. You see you cannot prevail in the long run (2004-2008) after giving the gift of both homeownership and foreclosure. It is a crime. If you engaged youâ€™re the cause and your are enjoined in the madness and need to be accounted for. And yes...the new legislation will give a BK judge the right to reduce the mortgage by what ever the courts sees fit! ....20% 50% 80% or free and clear by releasing the lien. Ridiculous, you say what! Now why.......The parties to the financing and sale have different roles but share the same name - - - Defendants!
Oh, and yes ....do contact your lender directly and wait 6 months while that short sale offer turns to foreclosure. Oh, hire an attorney who specializes in real estate matters and do what? Forget Pal - If you do not litigate you have no shot, understand, no shot of getting jack! Statement - Assume anyone who solicits you for a loan modification is interested in one thing only: getting a fee out of you. Hmmmm - That's right, so see an attorney who might just charge double the delinquency amount due for a retainer.
FORGET THE BROKERS - THESE JOE LUNCH MENUS ARE BROKE AND ITâ€™S DESTROYING FAMILIES AND AMERICA AND YOU TALK ABOUT BROKERS AND MODIFICATIONS AND WHAT!!!!!!!!!!THE GUYS BROKE FROM A PREDATORY LOAN FOR A HOME HE COULD NOT AFFORD. SOMEONE SOLD HIM THE HOME AND WE ARE LOOKING FOR THAT PERSONâ€¦THATâ€™S WHAT WE DO! GOT IT! â€œDO NOT GIVE MONEY TO A BROKER BECAUSE â€¦...â€ STOP! THESE PEOPLE ARE BROKE PLEASE! STOP OKAY! WHERES THE MONEY COMING FROMâ€¦..
( â€“ give it a rest as the Broker issue will not shift the Feds from their real focus - on something bigger, a far bigger picture).Really I cannot take much more. Good Luck.....then again....
First....as another answer mentioned, lenders can work with you for the Hope to Homeowners FHA loan mod. You can do this with your current lender or a new one. In order for the lender to have government backing of these new loans, they have to reduce the balance to the current market value. You agree to equity sharing as part of this too. So in the first year, if you have to sell the home, you get 0% of the equity. It increases by 10% each year until year 5 when the government gets 50% and they continue to get that 50% equity for the life of the loan.
Other loan mods are better for you depending on your situation. There were some really bad loans out there and most lenders realize it. You can really do this yourself. But it's uncomfortable, and so if you want to pay someone to handle it, you can. My understanding in California is that the only loan mod companies who can collect a fee up front are attorneys. If you do use one of them, I would make sure they offer a refund/partial refund if they can't help you. If your other option is bankrupcy, you might find one who does both, it will save you money in the end.
If you have a job and steady income, and would normally be considered a good risk, then the lender will want to work with you. I've seen many different types of work outs. If the first and second is with the same lender, I've seen them wipe out the second. I've seen 40 fixed at 4%, I've seen 5-year interest only loans then adjusting to 5.2%. There are lots of options. What I've recommended to my clients, there are attorneys out there who offer a free evaluation of your situation. I have a couple I like....call them and talk about your specific situation, they will go over your credit, income, loan, other credit obligations etc...then they will give you an idea of what they think they can get from the lender you have. This will give you an idea what to ask the lender if you want to go it alone, or....you can always pay them to do it.
I hope this helps! I have buyers who I helped buy in the past few years that are now in over their heads....I'm trying to stay on top of this to help. As a Realtor, I only get good will out of this, but that's OK with me. If you'd like to talk, feel free to call/email me directly and I'd be happy to give you some direction.