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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.

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1. Chances are good that you'll come across one. During the heyday of no-money-down lending, you were unlikely to have a buyer using a government-insured Federal Housing Administration (FHA) loan, which lets borrowers purchase a home with a down payment of as little as 3.5%. Now FHAs are the only game in town for anyone who can't put down the minimum 10% many banks require to get a conventional loan.

Thinking about a debt consolidation loan? For someone with a lot of credit card debt and other obligation, rolling all those bills into one monthly payment can seem like an attractive option, particularly when you can get a lower interest rate in the bargain. But there are downsides

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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Debt consolidation and debt settlement adverts are all over the media lately. This is quite predictable when millions upon millions of Americans are behind in their payments and risking foreclosure on their mortgages besides being maxed out on their credit cards. Understanding what each debt management system will do for you and which is the right one for you is vital if you are in serious debt and are struggling to make payments.

Debt Consolidation.

You have no doubt seen many adverts promising to consolidate your debts into one large loan that will charge you a lower interest rate and cheaper monthly payments. These debt consolidation loans do exist and can work for you if you choose the right loan. Of course they can also be the biggest financial mistake you make.

Understanding how debt consolidation loans work is the key to making the right choice.
Debt consolidation generally works as a secondary or even a primary mortgage loan. A debt consolidation company will buy off your other debts and  put them together into a mortgage-like loan. This makes your interest rate drop as the loan is secured by your home. The bad news is that the security for the loan is your home. If you don’t make payments your loan is at risk. However if your debts are on your credit cards or car loan and you do not make payments your debtors cannot force you to sell your home. However if your lender provides you with a debt consolidation secured by your home you could be forced to sell to pay the loan.
Another risk related to debt consolidation loans is that they can be expensive and incur in high setup fees which increase the principal on your debt and the interest you pay throughout the lifetime of the loan.

Debt Settlement.

Debt settlement works on a different premise. You settle directly with your lender and doesn’t involve a third party that buys your debt, reducing expenses significantly.
In order to settle your loan you must contact the debt settlement department of your bank and explain that although you would love to pay your loan you currently cannot afford to do so. They will ask for a load of information on your income and expenses and see what modifications they can make on your loan.

Modifications can include reducing the principal amount of your loan, increase the length of your loan and even reduce the interest rate.
The problem with debt settlement is that it destroys your credit rating as you are basically telling your lender you can’t pay your debts and that you need their help. That is not going to make you very popular with lenders.

A soft form of debt settlement is being encouraged by the government through the loan modification program.  It is well worth contacting the H.U.D (Housing and Urban Development department) to see if you can qualify for mortgage aid.

Which is the right debt management for you? Doing your own research is the key to find out. Neither of these options are without its disadvantages which is why planning and research are vital.

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Loan Modifications have caused an awful lot of spin in the last year. They have been portrayed as the only hope for cash strapped homeowners, as the Devil incarnate out to rip off desperate debtors. It is also the single largest investment the Government is backing in order to fend off the black clouds of the current Housing and Construction Industry crisis.

So what is the truth?

Are Loan Modifications great news for debtors or a risky business that can leave you in a worst state than when you started.

The answer is both, either or non of the above because it all depends on your personal circumstances and the way you deal with your loan modification.
Loan modifications are different to loan refinancing in that there is not a  change of contract. When you refinance your mortgage or loan you have to start the whole contractual process with all the expenses for the debtor and lender that it involves. Loan modifications keep the old contract with some variations. These variations can reduce the interest rate, principal (the amount you borrowed) reduce the monthly payments and increase the length of the loan. The Government is investing trillions of dollars to encourage banks to get their act together and help borrowers in trouble to modify their loans.
This of course is not an easy task as Banks are not geared to modify loans, but to provide loans and collect payments. The whole structure of a bank is designed to do pretty much the opposite to modifying loans.

However the alternative to a home loan modification is a mortgage foreclosure which is a costly operation for the bank that is rarely the best option, certainly not for the borrower who loses his home. Having said that in extreme cases when the borrower really can’t afford the payments and the price of the home has not dropped considerably it can be better for the homeowner to sell the house and foreclose the mortgage. This means that banks generally open to negotiating a loan modification as long as they are certain that the borrower can afford the modified monthly payments or that the customer can really not afford the current payments. Convincing your bank that this is actually the case is vital. The way you do this is by providing accurate information in the format and portrayed in the light your bank wants to see.

Presenting the information you are asked for and still portraying a picture that will help you get the loan modification you need is not a simple task. It does require an understanding of how loans work. You can do this yourself but you will need to spend some time researching the forms you are asked to fill and decide how to present the facts.

Loan modifications can also be expensive procedures that cost you money you don’t have and don’t provide you any benefits. This is the case of borrowers that do not qualify for loan modifications but are still made impossible promises by dubious loan modification consultants that ask for outrageous fees upfront for their services.

Loan modification companies can provide accurate advice and help you understand the intricacies of loan modifications, helping you decide how to present your case to the bank. However it doesn’t take a rocket scientist to do this if you are willing to spend some time researching your loan and the options you have.

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Mortgage Consultants that feed off desperate homeowners that are struggling with their monthly payments and risk foreclosure are becoming a priority for law enforcement agencies.
The Federal Trade Commission has recently started “Operation Loan Lies” a nationwide operation that involves 25 federal and state agencies. The goal is simple to shut down businesses that deceive homeowners by offering foreclosure rescue and mortgage modification services that don’t help but cost homeowners large sums in consultation and processing fees.
What are the results of Operation Loan Lies?
The Federal Trade Commission claims to have brought 14 cases, with the help of 23 state attorneys general and other law enforcement agencies, against 178 companies.
Even with the combined efforts of nationwide law enforcement agencies cracking down on mortgage modification conmen is going to be hard work. In a matter of months thousands of loan modification consultants appeared feeding off the millions of homeowners that risk foreclosure.
Unfortunately these conmen feed off the misconception that for profit companies that offer to reduce your debt and monthly payments will get better results than non profit government agencies.
What can we do to protect ourselves against the feeding frenzy of mortgage vultures?
Good information is your best weapon. As with all predators mortgage modification vultures will go for the weakest victim every time. Make yourself a hard target, ask questions, keep informed.
Having a quick checklist can help to avoid mortgage modification vultures. Avoid any company or consultant that:
1)    Wants to get paid before he or the company does anything. Not a good idea to pay someone before he does his job, it kind of takes away all incentive and is a basic tool for conmen.
2)    Say they can GUARANTEE they will stop your foreclosure and reduce your debt. Nobody can guarantee that because it is in the power of the bank not the loan modification company or you. If you do not pay your mortgage payments your mortgage will foreclose. Banks can accept workarounds, debt reductions and loan modifications but it is not a guarantee.
3)    Tell you to stop paying or communicating with your lender. You should never do this. Good communication with your lender is vital for a satisfactory debt reduction or loan modification. Conmen and fraudulent loan modification companies will ask you to stop communicating with your bank and let them deal with it all, while you pay their fees and they take your money with nothing to show for it.
Mortgage vultures can be avoided and government authorities are working hard to crackdown on this type of fraud that feeds off our weakest. Don’t become a victim, get smart and find quality counseling to avoid foreclosure. Surprisingly the best kind tends to be that which is free and offered by unbiased government institutions.

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Loan servicers will "significantly" increase the pace of mortgage modifications under the Obama foreclosure prevention program, the Treasury Department said Tuesday.

Sometimes the things that scare us the most are the subjects we know less about, death, darkness, losing someone we love and foreclosure are just a few examples. There is a reason we know little about the things we fear, not knowing is often worse; we always imagine things are worse than they really are. Learning about our fears and finding ways to deal with them is the best policy. This article will aim to shed some light on the issue of foreclosures and what they really are, that way we will hopefully fear them less and learn how to avoid them.

Foreclosure is a legal term to describe the termination of a mortgage or loan. Foreclosure occurs when the mortgagee (the lender) gets a court order that terminates the mortgage and allows the mortgagee or lender to redeem the mortgage’s security, nearly always the home itself. This occurs when the borrower fails to pay the mortgage principal and interest payments; the lender has then the right to force the borrower to either pay the payments he is behind in plus costs or sell the house or some other asset to meet his responsibility of paying the mortgage. When the borrower sells the property and uses the proceeding to pay the lender it is said that he has foreclosed the mortgage.

This rather dry definition we worked through provides some interesting points.

1) A foreclosure is a legal process that must be approved by the courts of equity. 2) Losing the house is not the only way to deal with the situation. The government is trying its best to avoid foreclosures and is willing to help most people that are willing to work hard to find a way around a foreclosure through loan modification and other types of financial aid. Do your homework and make it your job to jump through the necessary hoops to save our home.

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We live in a dog eat dog world that works for the loans, mortgages and DVD rental companies when you are late in returning a DVD, there is no mercy, you have to look after yourself and know what you are doing or get ready to lose some serious money. Finding a good deal in a competitive and complicated market like the credit industry is no easy task, fortunately it is not impossible and you don’t have to be a MENSA member to find a good loan modification for your mortgage or loan. You do however have to understand the basics of mortgages, loans and their respective modifications.
It is useful to view mortgages as the most basic investment a bank can make, that is an investment in you. They give you cash and get a steady return on their investment in the form of interest payments while they get their initial capital back with your principal payments. The rate of interest will depend on the going rate when you contracted the loan, how good your credit record was, how savvy you were when negotiating the loan conditions or a combination of all three of those factors.
Depending on the world economy, the going interest rate set by governments and a number of other factors banks are willing to lend at a lower or higher interest rate. If you can find a bank (it can be the same lender you are using now, or another one) that will lend you money at a cheaper interest rate you might be able to modify your mortgage to a lower interest rate. Similarly if you are struggling to make your mortgage payments you might be able to find a lender that will lend you the same amount but allow you a longer period of time to pay back, this will have the effect of lowering your monthly payments while increasing how much interest you pay on your mortgage. You can also modify your loan to increase the amount of cash you borrow or you could decide on any combination of all three options, lower interest, longer tenure and larger loan.
The key to find a good deal on your loan is to first check how expensive modifying your loan will be. To find this out you will need to know all the fees and costs your current lender is planning to charge you (a.k.a prepayment penalty fee) for paying early and depriving them of the interest you promised to pay and the fees your new lender will require to process the new loan with the modification you want. If you use a middleman business to process your application you will have to pay for their fee also. We don’t necessarily recommend this as most people can handle the paperwork themselves and the application businesses can’t do anything for your mortgage that you can’t do yourself.
Once you know the cost of a loan modification you need to know how much you are going to save with the loan modification. Savings can come in the form of lower interest rates or a shorter tenure. If you pay lower interest rates your overall interest payments for the mortgage can drop considerably and pay off your loan modification expenses in a matter of one or two years reaping substantial savings.
Of course the reason you want to modify your loan maybe not so much to save money but to make your payments affordable and this might involve lengthening your mortgage which will make your mortgage more expensive but at least you won’t lose your home.
It is as simple as that, compare the cost (real cost) of the loan mod and compare it to your savings, if there is a substantial saving you have found yourself a good deal.

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