Loan Modifications

Mortgage Loan Modification

A Great Way to Save Thousands of Dollars on Your Mortgage Payments

President Obama wants to help homeowners reduce their mortgage payments. The federal government has therefore started a new program to help people reduce their mortgage payments to approximately 31% of their gross monthly income. This new program is call Making Home Affordable.

Let's give you a simple example. If your gross monthly income is $3,000.00, then you calculate 31% of $3,000, which is $930. Therefore, President Obama would want your monthly mortgage payment to ideally be $930.

The monthly mortgage payment as calculated above is supposed to include: principal, interest, taxes, insurance, and condo fees, if any.

Therefore a good way to do a preliminary calculation to see if you qualify for a monthly mortgage payment reduction would be to total up your monthly income, and then multiply the total by 31%. If you are paying more that 31% of your monthly income for your monthly mortgage payment, (which includes principal, interest, taxes, insurance, and condo fees, if any) then you might very well be an excellent candidate for this new program.

Here is another simple example. Let's say we have a household that earns $4,000 a month. Take 31% of $4,000, and you get $1,240. If your monthly mortgage payment is $1,750, then the objective of the mortgage modification program would to be to reduce your monthly mortgage payment to $1,240 and save you $510 a month.

The government's statistics indicate that right now the average homeowner who gets a mortgage loan modification is saving about $550 a month on their mortgage payments. Some homeowners are actually saving $1,000 a month or more.

We can help our clients with their mortgage loan modifications, with the intention of saving them as much money as possible on their regular monthly mortgage payments. If you are ready to learn more please contact the Law Offices of Seymour Wasserstrum.

Step 1: Based on this loan modification program, the mortgage company has the right to reduce the interest rate on the mortgage to 2% per year. If the mortgage company can get you down to the 31% ratio by reducing your mortgage interest rate to 2%, you could probably receive a mortgage loan modification, without the need of extending the number of years left on your mortgage.

Step 2: If the mortgage company cannot bring you into the 31% ratio by reducing your interest rate by 2% per year, the next step is to extend the term of your mortgage for as long as 40 years. If the mortgage company can bring you into the 31% ratio by reducing your interest rate to 2% and extending the mortgage loan period up to 40 years, they should then give you a loan modification.

Step 3: If the mortgage company still cannot get you into the 31% ratio by using steps 1 or 2, then the third step would be to defer a portion of your principal payment.

There is one additional important benefit when you obtain a loan modification. When you make your mortgage payments on time each month, you get a credit of $83.33 towards a reduction of the principal balance of your mortgage. This credit continues for up to 5 years. Therefore, if you make your mortgage payments on time each month for 5 years, your mortgage principal loan balance would be reduced by $5,000. Here's an example to show you how that works:

Let's say you owe $300,000 to the mortgage company, and after they have reduced your interest rate to 2%, and after they have extended the term of your mortgage to 40 years, you still don't fit into the 31% ratio. The next step would be to see if a deferral of your principal balance would result in monthly mortgage payments within the 31% ratio.

For example, let's assume that if the mortgage company reduces your principal loan balance to $250,000.00, you now fit into the 31% ratio. You would thus qualify for the loan modification, and you would receive a reduction in your monthly mortgage payments.

The next question is what happens with the $50,000 in principal that the mortgage company just deferred. This debt is not forgiven. Instead, the debt is deferred. You would not have to pay interest on this $50,000, and you would not have to pay it back until one of the following things happen;

a. You sell your home.

b. You refinance your home.

c. You have completed the term of your mortgage.

A mortgage modification can result in huge savings in monthly payments in the long term. If you get a reduction of $500 a month, that totals $6,000 a year. This would save you $30,000 in payments over 5 years, and it would save you $60,000 in monthly payments over 10 years. The savings would total $120,000 in monthly payments in over 20 years and $180,000 in 30 years.

Obviously, if you are having trouble making your mortgage payments, and if you are in jeopardy of foreclosure, this can be a very beneficial program to help you save your home. That is the major purpose of the program - - - to give homeowners an opportunity to save their homes by making their monthly mortgage payments much more affordable.

The mortgage company requires strict proof as to your finances. You need to prove your monthly income and monthly expenses. You cannot simply make up numbers. There is a serious penalty for falsifying information. This program is for honest people who are having financial difficulties paying their home mortgage, and the mortgage company is going to look very carefully at all the documentation that is submitted.

It is therefore very important to prepare all paperwork and documentation properly and to submit everything to the mortgage company on a timely basis.

Our office will be helping many people to obtain a mortgage loan modification, and we have trained members of our team to make sure that all of our clients obtain and submit all necessary paper work to the mortgage company as promptly as possible.

Here is a sample list of the type of list of information we will need from you, so that we can get the loan modification process started for you quickly:

1. All your pay stubs for the last 2 months.

2. Proof of all other income you receive. This means, by way of example,

a. Unemployment,

b. Disability,

c. Child Support and Alimony,

d. Welfare,

e. Food Stamps,

f. Pensions,

g. Any other income coming in to your household.

If you are married and your spouse works, we also need proof your spouse's income. If you are not married and live with someone who works or has other income, we need proof of income for that person also.

3. We need proof of your monthly expenses, including payments for the following items;

a. Credit card bills,

b. Car payments,

c. Utility payments,

d. Food,

e. Real estate taxes and insurance if they are not paid as part of your mortgage payment,

f. Condo fees if this applies to you,

g. Car insurance and other insurance

h. Medical expenses,

i. Clothing expense,

j. All other regular monthly expenses.

Your expenses have to be truthfully listed, and you must be able to document your expenses.

4. We need copies of your tax returns for the past 2 years.

5. We need to submit an affidavit that demonstrates the financial hardship which prevents you from making your mortgage payment, or which makes it very difficult for you to have enough money to make your regular mortgage payment each month. In other words, we have to demonstrate that you have come upon some sort of hardship or change in your economic circumstances.

If you have the financial ability to make your present mortgage payment based on your present budget, then you may not be able to qualify for a loan modification. You have to demonstrate some kind of need or hardship.

Some examples of a hardship situation would be the following.

a. Decrease in income,

b. Loss of a job,

c. Family difficulties, such as divorce or other problems,

d. Unexpected medical bills,

e. Other types of unexpected bills and expenses,

g. Monthly mortgage payments that are increasing because of an adjustable mortgage, or mortgage increases for other reasons.

It does not necessarily matter whether you are presently up to date on your mortgage payments, or whether you are behind on your mortgage payments. All people who meet the legal requirements for a loan modification based on the Making Home Affordable Program should be considered for a mortgage loan modification.

If you are able to make your monthly mortgage payments while you are applying for a loan modification, you should continue doing so.

When all of the paperwork and documents have been submitted by us to the mortgage company, the mortgage company representatives review everything in detail. They might ask for more information and documentation, and the entire process usually takes a considerable amount of time.

We would expect it to take a minimum of 90 days from the date of our complete submission of documents to the mortgage company before we receive a response from the mortgage company. Keep in mind that millions of people are applying for loan modifications, and most mortgage companies are literally swamped with applications for loan modifications. If the mortgage company believes you qualify for a reduction, they will let us know the amount of your new monthly payment. The mortgage company will then put you on a 3 month test period to see if you can afford to promptly make the new loan payments.

The 3 month test period is a critical stage of the proceedings. The mortgage company will give you a due date for each of the 3 payments, and every payment has to be made exactly on time or early. There is no grace period. If you have been approved to make payments for the test period and you make just one payment just one day late, the mortgage company can terminate you from the program and that means you cannot reapply for the program and for one year. This is a very harsh penalty, so you are approved for making payment to a test period it is very important you make every single payment on time or early.