Incentives Archives Page 2 Of 2 – Refinance – Mortgage Refinancing Rates And Information

Loan Modifications: Three Mistakes That Will Cost You

September 7th, 2009 No comments

There are things you need to be careful you choose right, your spouse, your health insurance, your home and mortgage. If you got the wrong wife, husband or health insurance there’s not much help to be found here.

However if you are struggling to pay your mortgage, the value of your home has dropped to the basement or your bank is ignoring your calls then there might be something we can help with.

In a perfect world loan modifications would not be necessary. We would get things right the first time. Inflation wouldn’t cheapen money, workers wouldn’t lose their jobs, houses wouldn’t lose value and we would all have perfect credit rating. That of course is not the real world. Unfortunately those or only a few of the many things that can go wrong when owning a home and a mortgage.

Loan Modifications seek to remedy some of the problems that can sour a mortgage and make it impossible for home owners to pay monthly payments. Loan Modifications are not a financial holy grail that can solve all problems; it is a tool that if used wisely can help some borrowers in difficulties.

The U.S government has made an effort to make loan modifications available to as many home owners as possible by creating incentives both for service providers (lenders) and home owners (borrowers). The incentives include bonuses for paying your mortgage on time and for borrowers and cash per loan modification for banks and service providers.

However even the Obama Administration has made it clear that loan modifications are not for everyone. They are not for home owners that have no chance of being able to meet their financial responsibilities. Foreclosure is the only way for them. Loan Modifications are for those that are going through hardship but can find a solution with the right kind of help.

You will hear a lot of information on loan modification and how to take advantage of the opportunities the Government is offering we are going to look at three things you very probably don’t want to do.

Pay Someone To Do The Loan Modification For You.
It might seem counterintuitive to say it is best not to get a professional to do it for you and some loan modification consultants do provide a good service. However loan modifications are not that complex you can’t do it yourself. Loan modifications can be very expensive if you get a third party to do them for you. Besides there are so many scammers out there it could spell disaster if you choose the wrong company.

Ignore Your Bank Or Service Provider
Whether you choose to do your Loan Modification by yourself or get a “professional” it always pays to contact your bank and explain your situation before you become delinquent on your mortgage. It might seem strange but banks like to be told when they aren’t going to be paid. Negotiating a loan modification or any other option is much easier if you are still not behind in your payments.

Fall Into A Spiral Of Debt
Many actually see loan modifications as a way to get some extra cash or to allow them to borrow more. The main problem people have with their debt is not that their mortgages are too high but that they have so many other debts to pay. Learning how to save and avoid unnecessary debt is one of the most valuable financial lessons we can learn and that so many of us have to learn the hard way.

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The Obama Loan Modification Aid Program, What Are The Benefits?

August 31st, 2009 No comments

The objectives of the Obama Loan Modifications program are rather ambitious, to help 7 million people (the number is also quoted as 9 million, depending who you ask) modify their loan in order to afford monthly mortgage payments. In fact the way the program is designed you can save money by modifying your loan. The government is seriously backing this program with their big guns, namely $75 billion of funding. As always with these programs there are technicalities to deal with but the gist is rather simple to understand.

The loan modification program provides incentives to banks and service providers to modify your loan to a more sustainable monthly payment if you qualify through the trial period. The three month trial period tests if you are on time with your payments.

If you are, you receive a bonus that goes towards paying the principal of your loan. After that, every year you pay your mortgage without being delinquent on any payment another bonus is paid towards your mortgage principal.

These bonuses are worth extra because they pay the actual cash you initially borrowed, on which you will not have to pay interest. Who qualifies? This is one of the prickly areas of the program. The Loan modification aid program was designed to be as open as possible. You don´t have to be behind in your payments to qualify, just struggling to meet the monthly payments with your current income.

However the issue gets a little complicated due to a clause that limits a lot of home owners that are struggling. You can only qualify if your mortgage represents more than 30% of your monthly income. If it is less you will not qualify. This clause is actually under revision due to the fact that most borrowers don´t only owe on their mortgage but on their car, their credit cards, etc… This causes some of the most desperate home owners that owe money from various lenders not to qualify for the help they need. There are two main groups that can qualify for loan modification.

Those that want a loan modification but that didn´t qualify because the value of their home dropped and those that are on the brink of foreclosure. Either of these groups can get a loan modification if they comply with the programs requirements.

Don’t forget.

It is free to apply for a loan modifications. What is more, the government is paying banks to give you loan modifications. It is therefore a great idea to not trust companies who ask for expensive fees to get your loan modification processed. The best advice you can get is for a change free. Contact the Home Affordable Mortgage Program or any of the other government housing departments.

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Obama Mortgage Plan, Pays For Paying Your Mortgage

August 3rd, 2009 No comments

Obama Mortgage Plan, Pays For Paying Your Mortgage
Home mortgage aid plans are hard to design. Because of how the ideologies behind open market and social responsibility are polarized no matter what you do with a mortgage aid plan pretty much half the nation is going to disagree with you.

Obama’s new mortgage plan is not perfect, not even his closest aides will say that. Its strongest opponents will point out that the new mortgage plan does not really cover for homes that have seriously dropped in value in the last months/years. Most of the families in trouble live in homes that have lost serious value, so there is a question mark in how effective this mortgage modification plan is going to be.
However the new plan has managed to incentivize the payment of mortgages and their previous modification so that it is worthwhile for banks and borrowers. This might not be enough to tip the scales on the millions of households that are at risk of losing their home this year but then again, it might.

If anything does help to tip the scales on the current crisis is to make it attractive for homeowners to pay their mortgage as well as reducing it’s principal and making it affordable on a monthly basis. Let’s face it, if your home is under water (it is worth less than what you owe on it) and there is no prospect of prices going up and you are struggling to pay the mortgage you might be inclined to cut your losses, give up and let the home go. Of course if someone is willing to give you some extra incentive to pay your mortgage and make it affordable, you might just give it a try.
What incentives does the Obama Mortgage Plan offer?
There are two main benefits or incentives homeowners that are in the red can take advantage of.
1) Once their mortgage has been modified and monthly payments begin the Treasury will pay an incentive for every mortgage payment a borrower pays on time that goes to pay the principal balance of the loan(The cash you actually borrowed, not the interest). This is interesting because it will help reduce the length of the loan and the amount of interest paid on it. Over a five year period this “incentive” could help reduce the principal on the loan by $5,000. Reducing the principal of the mortgage has of course even greater repercussions as years go by. If you have a 15 year mortgage and you reduce your principal by $5,000 in the first five years you will be actually saving yourself over $3,000 in interest by the end of your mortgage.
2) There is a trial period of three months before any modification is permanent. During those three months the homeowner must pay his mortgage on time. If he does he gets $1,000 from the government every year for next three years. If the mortgage isn’t paid on time there is no deal.
These are not huge benefits but they are something and they might just help people start thinking in a different way and help people dig themselves out of financial trouble.

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Mortgage Plan: Who Actually Qualifies

August 3rd, 2009 No comments

The new mortgage plan is out there, fresh out the box. The new loan mortgage plan has been designed to help more people dig themselves out the current crisis. There are actually some clever incentives for those who try and work with their mortgage even if it is upside down. So here are the two question we are all asking: What does this “new mortgage plan” offer? And who qualifies?

The mortgage plan has two main objectives:

1) To help people who are going to foreclose on their mortgage because they are late in their mortgage payments. This demographic is the priority of the plan with good reason. The avalanche in home foreclosures is affecting the whole housing and construction industry besides these are the families hardest hit by the housing crisis. The mortgage plan will help these homeowners to modify their mortgages and make them affordable.

2) The second objective is to help with the home mortgages of home owners that can’t refinance their home and take advantage of the current lower interest rates because the value of their home has dropped so much it is worth less than their mortgage. The new mortgage “deal” will help these home mortgage owners to refinance their homes with lower interest rates. Unfortunately the restrictions on this type of home mortgage are so high the number of homeowners that will benefit from it will be significantly lower.

In a nutshell the two-pronged working plan is to save the mortgages or homeowners that are behind in their payments and that would otherwise lose their homes with a mortgage modification that would reduce their monthly payments and make them affordable. The second prong aims to open under water mortgages that are worth more than the value of the home to refinancing with the current lower interest rates.

Who qualifies?

The devil is as usual in the detail but here are the main points homeowners must meet to qualify:

1) The mortgage must have been secured before January the first 2009.

2) The primary mortgage must be less than $729,500. This figure has actually been revise a few times to include the mortgages of homeowners in expensive states and areas.

3) The homeowner must live in the house he is requesting aid for. This mortgage plan is not there to save investments but family homes.

4) The homeowner must sign a financial hardship statement that documents his inability to pay his mortgage.

5) Tax returns and pay stubs must be fully documented.

6) If the homeowner pays over 55% of his income on debts he must sign up for counseling. I think this is probably one of the best ideas this mortgage plan sets out as so much of the debt trouble we get into is due to bad financial habits that can be un-learned with some practical help.

As you will have noticed the requirements on the new deal have been relaxed and more mortgage homeowners should be able to benefit, but will it be enough?

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Mortgage Modifications Drop But Mortgage Workouts Rise in HOPE

August 1st, 2009 No comments

HOPE produced mixed results in the month of June. On the whole thought it seems like June was a better month for the government foreclosure and debt management counseling service.

HOPE Now program provides counsel for home owners in risk of losing their homes by providing specific advice and debt management workouts to refinance mortgages and arrange loan modifications.

The statistics provided by HOPE NOW itself show a decrease of 5.1% in the overall mortgage modification activity, although, as HOPE itself explains this might be due to the way the statistic is calculated. Apparently for a person to qualify for a loan mod they must undergo a trial period of three months. These pre-loan modification trials do not qualify as loan modifications but are categorized as “trial modification” or “repayment plans” all of which seems to screw the figures a little.

The executive director of HOPE NOW Faith Schwartz is reported as saying: “I am proud of the continued progress made by HOPE NOW servicers and am confident that they are aggressively and proactively using HAMP, as well as other successful foreclosure prevention programs, to help as many homeowners as possible”.
The positive figures Schwartz is referring to are the 310,000 homeowners that completed home mortgage workouts during the month of June, which signifies a 25% increase from the month of May.

All of this occurs in a context where government is flexing its muscles to accelerate loan modifications nationwide providing more incentives for banks to accept (and fast) loan modifications and mortgage refinancing.

If you feel you are in danger of losing your home because you are struggling with your monthly payments contact HOPE NOW for a personalized analysis of your situation and practical help to negotiate and work out your loan modification. It is vital to take advantage of this and other mortgage modification counseling services earlier rather than later as it is much easier (and profitable) to negotiate with a lender before you become a delinquent borrower (i.e are behind in your payments) as you have a much stronger hand when settling and negotiating the outstanding debt.
You can get this free service by calling 888-995-HOPE (4673). Make sure you have your basic mortgage documentation close by as you will be asked some questions by the operators in order to assess your situation.

Beware of current scams that ask for payment for this service, HOPE NOW is a free government aid program that does not request any kind of payment.

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Has The Mortgage Refinancing Season Ended

July 16th, 2009 No comments

Has The Mortgage Refinancing Season Ended

Mortgage refinancing has become as exciting as watching the stock market. The once droll and wonderful (for home owners) business of seeing interests remain pretty much stable while house prices increased with any sign of stopping has been exchanged for the much more exciting activity of seeing how low the interest rates can be dropped and how far the Government can bend back to lower them further.

This has created an excellent opportunity for those conservative people that were boring and smart enough to save when everybody was spending of being prudent when prudence seemed pointless, because if you have cash now and an excellent credit score you could get the deal of your life. With 30 year interest rates at historical lows you could buy the house of your dreams for around 4.25%.

This window of opportunity is of course not the main outcome the Government is working towards although it may very well prove to be a benign side effect that can further contribute to jump start the credit and housing industry.

The main issue Government is trying to deal with when lower is as we mentioned to incentivize the buying of new and built homes while giving home owners that have fallen in financial difficulties the possibility of renegotiation their mortgages at a more advantageous rate of interest. If a family renegotiates their mortgage wisely the significant drop in interest rates could mean the difference between affording the monthly mortgage payments and not. For those home owners that are not in any particular financial strife it can mean paying off the mortgage sooner or financing the purchase of a car or a home improvement on the interest drop.

However the fear for those that are planning to modify their loans or are in the process of getting their paperwork or credit in order is that they will miss the train. That the Government’s incentives will work raising interest rates and closing the window of opportunity that currently exists.

Should we worry?
If we are to trust the Mortgage Bankers Association’s chief economist the answer is no. Jay Brinkmann the MBA’s chief economist predicts that in the next the current interest rates should hold for the next six to seven months. That is music to the ears of home owners that see how their loan modification and mortgage refinancing procedures take more than they expect or is experiencing delays in getting to the closing table.
If you are wondering who to thank for the drop in interest rates thank the Uncle Sam for investing so heavily in Banks, providing cheap money for banks to invest in insured loans and mortgages.

The sobering question is how long can this continue for, the short to mid-term may be safe but can this continue in the long term? It can’t if you listen to Dan Cutaia, president of Fairway Independent Mortgage Corp who recently said at an MBA’s conference: “The government can’t keep printing money and buying mortgage backed securities forever”.

Historically the secondary housing market has been a meeting place for investors and borrowers where offer and demand created its own prices and conditions. The government has modified the “natural” state of things by using its muscle to provide the money few are willing to invest.

What will happen in the long term is a bridge we have yet to cross, however if you are currently in the market to refinance or buy a home don’t worry you will not miss train, low interest rates are here to stay, for now.

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Home Loan Refinancing Anti-Foreclosure Effort Results Disclosed

July 7th, 2009 Comments off

Home Loan Refinancing Anti-Foreclosure Effort Results Disclosed

A lot has been said of the efforts of the Obama administration to curve the drop in the credit and real estate sector. You can love it or hate it but you can’t argue that an effort is being made. Our previous blogs discussed the changes in the eligibility requirements to include more borrowers but have they been enough?

What are the results of this broad effort to alleviate those hit the hardest by the crises and that are in risk of losing their homes?
The quick answer is that we don’t really know. The White House guesstimates that “over 50,000” at risk loans have been refinanced so that homeowners can keep their homes. The exact number is not available because a tracking system for refinanced mortgages is still to be set up.

This has not stopped the Treasury from “predicting” that 20,000 bad loans will be “saved” ever y week by September. That sounds great and will be a great help for many families. However if analysts’ predictions are correct seven million homes will foreclose this year and next year. Of these foreclosures 4.5 million are expected to be distress sales. If this were to really happen it would further drag the Real Estate sector, dropping prices and increasing inflation. When you are talking about 7 million foreclosures a year, 20,000 “rescues” a week (c. million a year) does not sound that great, especially when a lot of the worst cases will not be covered by the current plan.

The demand for mortgage refinancing relief has been so great that banks claim to struggle to meet demand. However there is no real incentive for Banks to go out of their way to speed up things. Current incentives measures provide up to $75 billion to banks to refinance mortgages without any penalty if loans are not modified. The mortgage modifications have focused on monthly payments reduction decreasing the monthly cost of a mortgage but making it a much more expensive product. Banks are lapping it up as these loans are also backed by Fannie and Freddie making it a win-win market for them.

These monthly payment reduction schemes sound great in principal but do not tackle the issue of home equity. As monthly payments drop the mortgage principal (amount borrowed) increases reducing further the equity (difference between the value of the home and the money owed on it). This reduces incentives to keep up to date with payments as the chance of being able to sell at a profit drop.

A potentially more useful measure would be to help reduce the principal of mortgages for borrowers in trouble to encourage monthly payments and avoiding foreclosure. If the current rise in foreclosures is not stopped it will create it’s own domino effect dragging prices down and further increasing inflation.

The effort to stop the crisis and impending doom some analysts predict this have been huge, the big question is have they or will they be enough to actually stop it from happening.

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