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Providing loan modifications to those that need them and are eligible according to the current criteria is the goal of the cash happy loan modification aid program.

The goal is to keep out scammers and those who wish to take advantage of the system while not letting the “deserving” fall through the cracks. This is an ambitious goal. As we have discussed in previous blogs making good rules that keep out the cheats and welcomes the eligible is very hard.

Here is the current ten point criteria for loan modifications:

1.)    Loans must be conforming conventional loans or conforming jumbo mortgage loans and they must have been contracted before January 1, 2008. What is a “conforming” loan is changing all the time.

2.)    You must be three payments past due. This requirement was happily dropped. You don’t need to be behind in your payments although you must be able to prove you can’t pay your mortgage payments but could afford those of a modified loan.

3.)    The loan is secured by a one-unit property and must be the borrower’s primary residence.

4.)    The current mark to market LTV must be of 80 per cent or more.

5.)    Property must not be abandoned, vacant, condemned or in serious disrepair as well as being the borrowers primary residence.

6.)    The goal of the loan modification is to reduce monthly payments to 33% of the homeowners monthly income. In order for this to occur, servicers may:

7.)    Capitalize accrued interest, escrow advances and costs as far as state law allows.

8.)    Extend the term of the mortgage (tenure) by up to 480 months (40 years).

9.)    Reduce the mortgage loan interest rate in increments of .125% to a fixed rate of no less than 3%. If this causes the rate to be below market rate it will step up in annual increments  to a market rate after 5 years have passed.

10.)    As a last resort eligible borrowers will be provided principal forbearance which will result in balloon payment. This means payments will be kept low while the big money is paid when the house is sold or the loan matures.

Some of the points of this criterion are under their third or even fourth revision so checking for accuracy is wise. The key criteria is to be able to afford the reduced monthly payments. If you can’t afford a reasonable loan modification there is little hope. This does not mean unemployed borrowers are automatically barred from loan modifications but they must provide some proof of income or prove they are likely to find employment soon.

The methods the government suggests to reduce monthly payments are rather bold which explains why many banks are doing their best to drag their feet as in many cases it actually costs them money to provide the loan modification.

Related posts:

1. Loan Modifications Only Hope For American Dream
2. Loan Modifications, The Truth Behind The Spin
3. Loan Modifications, lies, scams and misinformation

Related posts:

1. Loan Modifications Only Hope For American Dream
2. Loan Modifications, The Truth Behind The Spin
3. Loan Modifications, lies, scams and misinformation

What is the cost of refinancing your mortgage?

It is good to calculate the cost before doing something you might later regret. This applies to mortgage modifications, trips to Siberia where you find you don’t have enough for the return ticket or holidays in Paris when you didn’t know a bottle of water cost $10. However calculating the real cost of financial products like loan modifications can be difficult when advertisers are doing the best to attract your business without giving you the important details, how much is it going to cost. This article has the somewhat ambitious goal of clarifying the real cost of refinancing your mortgage or modifying your loan.

The bottom line.

The bottom line is that refinancing your mortgage or modifying your home loan is likely to cost you something between 3 to 6 per cent of your outstanding mortgage in fees. The exact costs vary from state to state and country to country so you will need to do some extra homework to find out the exact costs in your neck of the woods.

Application fee.

This fee gets the wheels of your loan modification spinning. It is the fee banks and lenders charge to get started on your case, ask for credit reports and print the paperwork. The fee can vary from $75 to $300 depending on the bank or lender.
There are also companies that offer to take care of all the paperwork involved in applying for a loan modification, they also charge a fee. These companies can be helpful and successful but there is really no reason why you can’t look after your own loan modification and it will be cheaper.

Loan origination fee.

This is a fee the lender charges to analyze and prepare your mortgage. Yep, I know, very similar to the application fee. This one can be pricey or free depending on the borrower, it ranges from nothing to 1.5% of the pending mortgage.

Points.

A point is an percentage of the outstanding debt, professionals and lenders charge points to reduce the interest of the loan and for other services. How many points are charged is negotiable with your lender.

Appraisal and inspection fee.

Your lender might ask for a new appraisal of the house to make sure it is still a suitable security for the loan. A termite and other bugs inspection may also be required for the same reason. Plan $475 to $1,000 for both.

Attorney fees.

Lenders will generally charge the borrower for the closing of the modification by a lawyer. The price will vary from $500 to $1,000.
Getting dizzy? We’re just getting started you have the new insurances that go with the mortgage, the title search to make sure the house is yours, a final survey of the house’s location and of course let us not forget the prepayment penalty that can range from nothing to 6 month interest payments.

By this moment you are probably thinking that it is simply not worth getting a loan modification, mostly you would be wrong. To find out the savings of a loan modification please read my next blog.

Related posts:

1. What does no-cost loan refinancing cost you
2. Are mortgage modifications cost effective
3. Do’s and don’ts of mortgage refinancing.

Related posts:

1. What does no-cost loan refinancing cost you
2. Are mortgage modifications cost effective
3. Do’s and don’ts of mortgage refinancing.