Is The Housing Bailout For You? – Loan Modification Help Center
The new housing plan announced by President Obama last week has two main parts. First, there is a $75 billion loan modification plan and, second, there is a program that helps borrowers who are not in danger of defaulting refinance their mortgage.
These are some of the key questions to ask to determine if you can benefit from the plan:
Do I have to fall behind on my loan payments to be eligible for a loan modification?
No. Borrowers must simply demonstrate that they are in danger of falling behind on their mortgage and that they don’t have sufficient income to make future mortgage payments. Borrowers with ballooning mortgage payments or interest rates that are resetting may benefit from the new plan.
What are the loan modification requirements?
To be eligible for modification under the plan, the loan must be a first mortgage on the borrower’s primary residence. Borrowers must currently be paying more than 31% of their monthly gross income toward mortgage payments. Jumbo loans that exceed Fannie or Freddie loan limits are not eligible. Ultimately, your eligibility will be determined by your mortgage lender.
What if I am “under water” and my mortgage is more than the value of my property?
As long as the amount owed on a first mortgage does not exceed 105% of the home’s current value, borrowers with limited equity can refinance into a 30-year or 15-year fixed-rate mortgage. This refinance option is open to only to borrowers with conforming loans that are owned or guaranteed by Fannie Mae or Freddie Mac. Borrowers must show that they are current on mortgage payments and that they will be able to meet the new mortgage payments.
How do I know if my mortgage is owned or guaranteed by Fannie or Freddie?
The White House will release full eligibility details on March 4, when the program begins, and it is recommended that borrowers contact their lender at that time to see if their mortgage is owned or guaranteed by Fannie or Freddie.
Does my lender HAVE to participate in the program?
No. Participation by lenders is voluntary, but the government provides subsidies to encourage lenders to modify loans. For example, mortgage servicers receive $1,000 for each loan modification and can also get another $1,000 annually for three years if the borrower stays current on the loan.
To learn more about loan modification options, visit www.loanmodificationhelpcenter.org
By: Loan Modification Help Center
Sub Prime Loan Modification
Sub-prime lending is a type of credit given to homeowners who do not meet the criteria for regular (“prime”) loans. A typical sub-prime borrower has a poor or limited credit history and a FICO score of less than 620. These factors make them a risky investment for regular lenders, which keeps them from taking out loans. To compensate for the risk, sub-prime lenders impose higher costs on their contracts. For credit cards, this is usually a higher fee for over-the-limit spending or late fees. Sub-prime mortgages usually have higher interest rates and stricter terms.
Contrary to popular belief, sub-prime lending is a perfectly legal business. But like many new industries, it has been tainted by lenders who don’t play by industry standards. From 2003 to 2007, shady companies have turned up offering terms ranging from unfair to downright illegal. This, along with the economic slowdown, has contributed a great deal to the real estate crisis that forced many homeowners into foreclosure.
Are all sub-prime loans bad?
No. There are actually some sub-prime companies who give you good value for your money. If you find a good lender and stay current, sub-prime lending can have its benefits.For example, many people use sub-prime loans as a means of credit repair. Basically, it gives you a chance to rebuild your credit history and improve your scores. By keeping up a good record on sub-prime loans, you can eventually refinance to better terms and get back on your feet.
How do I know when a loan is sub-prime?
The first thing you should look at is the cost of the loan. Sub-prime loans have a higher overall cost (including interest, origination and closing fees) compared to prime loans. Although the basic formula is the same for both types, the pricing for sub-prime loans is more noticeably risk-based. A low credit score, small down payment, and other negative factors can greatly increase the cost of a sub-prime loan.
Another common feature is the prepayment penalty. Prepayment is when you pay more than the minimum monthly amount, or pay off the loan ahead of schedule. The penalty is to make up for lost interest on the lender’s part. Because you’re getting off early, the lender stops earning regular interest—and naturally, they charge you for it.
Many sub-prime mortgages follow the 2/28 structure. This means that you pay a fixed interest rate for the first two years, after which the loan switches to an adjustable rate where your payments are determined by market indicators. Often, the introductory rate is higher than the current index and the margin is applied once the loan shifts. For example, a lender can give you an intro rate of 8% while the index is currently at 4%, with a margin set at 6%. Assuming the index stays the same; your rate can jump to 10% when your two years is over.
What can I do if I’m in a sub-prime loan?
Fortunately, there are laws in place to protect borrowers in any loan, prime or sub-prime. For instance, the Real Estate Settlement Procedures Act (RESPA) requires all lenders to give you a good faith estimate of the total cost of the loan before closing any deals. This prevents any third party, such as mortgage brokers, from making any kickbacks at your expense.
All mortgages are also covered by the Truth in Lending Act (TILA). This law gives you the right to know the full lending terms and loan costs in any credit transaction, including credit cards. The TILA allows you to opt out of a transaction within a reasonable time if you don’t agree with some of the terms.
If a sub-prime mortgage has put you in financial difficulty, another thing you can do is apply for Loan Modification or in this case Sub Prime Loan Modification refers to an agreement between you and your lender to change the terms of your loan on account of your financial situation. This way you can modify your loan terms to a more affordable level. The Sub Prime Mortgage Loan Modification is a lengthy and time consuming process. However a competent loan modification attorney can expertly handle your case and expedite the loan modification process. A loan modification attorney will expertly present your case and use the above mentioned lending laws as leverage to get you more reasonable rates. If you’re already in foreclosure, this will also stop the process while you work out better terms with your lender.
By: Loan Modification Attorney
Shopping Is The Way To Find The Best Mortgage Refinance Loan
How do you find the best home loan mortgage refinance for your financial situation. You shop. Just like you would for anything else. Whether you have refinanced your home mortgage loan before or not you should still look around.
Do not assume that your current lender is your best option. It is only natural to think that if you have been paying your mortgage on time every month that the lender who holds your current mortgage is the best place to go again. They may very well be, but you should do yourself and your family a favor and find our for sure.
Mortgage refinancing is a very competitive business. There are plenty of lenders who want your business. The main thing is to get some quotes and do it with established lenders. Especially if you are shopping online.
New lenders can get there practice on someone else. We are talking about your home and your money. Established lenders have the experience to do the best job for you. The problem with the internet is anyone can build a website in one day. That is not the type of lender or mortgage broker you are looking for.
Let the lenders know you are shopping around for the best rates and are not making a decision today. This will take some of the pressure off of you immediately as well as give each lender the incentive to come up with the best rate and the best mortgage loan package. After all they are competing for your business. You get bids on home improvements and refinancing your mortgage is really just another home improvement if you think about it. You are trying to improve yourself financially.
Once you have gotten several mortgage rate quotes and your quote includes monthly payments, terms, and closing costs, it is time to sit down and compare all of the information you have compiled. Don’t just look at monthly payment. Determine what is the most important reason you want to refinance.
For some people it is consolidating debts. Others need some cash right now. Interest rates might be at an all time low and it is a great time to lower your monthly mortgage payment. For you it might be to pay your home off early and you need to shorten the life of the loan.
To find the best home loan mortgage refinance takes a little bit of thought and effort, but is worth it in the long run.
By: Jeff Schuman