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If you want to refinance your mortgage into a loan with a sub-5% interest rate, better hurry. Your window of opportunity is closing fast.

Loan Modifications can seem complicated to many of us. Especially when we are dealing with the stress of losing our home and we are presented with a seemingly endless list of requirements and forms to cope with. It is easy when writing many articles on a specialized subject to assume that everyone knows what you are talking about, that everybody is familiar with what HAMP, TARP, a servicing company, short sales and foreclosures are.

If you are an expert in loan modifications what on earth are you doing reading an article titled Back To Basics, if not this article is for you. This article will explain the big picture loan modifications are currently set in and the basic terms you must be comfortable with.

Who is the owner of your mortgage? Knowing who owns your mortgage is vital. This is not as easy as it sounds. Often the bank or institution you bought your mortgage from is just a handler, a servicing company that sells mortgages and collects payments on behalf of an investor. We will not go into detail with how mortgages are bundled and sold but it is enough to say that it is probably more complicated than you expect so it pays to approach your lender or mortgage servicer with large amounts of patience and an open mind. It is also a good idea to become somewhat of an expert on the subject so you can at least ask the right questions and know when you are being taken for a ride.

The Programs.
Facing mixed feelings and responses from the public the American administration has started many programs and measures to modify loans and make them more affordable for troubled homeowners. There are two main programs, the HARP program (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program).

HARP is for homeowners that are current on their payments but have not been able to take advantage of the current lower interest rates because the value of their home has dropped and they are not able to refinance their mortgage. In order to qualify for HARP applicants must have mortgages owned or insured by Fannie Mae or Freddie Mac.

HAMP is by far the most widely used program. Any servicing company is eligible. The government provides incentives to investors and borrowers if a loan modification is successful. The purpose of HAMP is to bring mortgage payments down to 31% or less of a family’s monthly income. This program requires homeowners to have a job and be able to pay for a reasonable mortgage payment. The first step you must make with HAMP is to qualify for a three month trial loan modification. Once you have gone throught the three months without missing a payment you can qualify for a full loan modification.

HAMP reduces loan payments with three main methods: 1) Reducing interest, 2) Extending the mortgage term up to a maximum of 40 years and 3) Forbearance of principal and allowing for a ballon payment at the end of the mortgage.

Don’t pay for help, it is free!
It is importance not to fall for loan modification scammers no matter how much you hate paperwork. The best advice comes from the government and they have a vested interest in your success. You can call HUD for approved housing counseling at 239 434-2397 or visit www.hud.gov.

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1. HAMP, Way Out For Delinquent Borrowers And Those Without Fannie
2. U.S Loan Modifications Hit Obama’s target Early But Nobody’s Impressed
3. Loan Modifications Only Hope For American Dream

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Homeowners in the United States have all asked themselves questions about loan refinance. Whether they are in serious financial trouble or not they all wonder if they could benefit from the governments eagerness to spend taxpayer dollars on loan refinance.

This series of articles seeks to answer in a simple, jargon-free manner to the all-important questions that are on your mind.

Question 1.) I am current with my mortgage payments. Can a refinance under the Home Affordable Refinance Program (HARP) actually help me?

Oh yes. If you are current on your loan payments but want to modify your loan to take advantage of the current lower interest rates but can’t do it because your home has decreased in value you are one of the demographics HARP is specifically targeting. A loan refinance that lowers your interest rate can provide significant savings now and for the entire lifetime of your loan.

If you take advantage of a refinance under HARP, Fannie Mae and Freddie Mac will allow you to modify a loan they provided or guaranteed with mortgage backed securities.

Question 2.) I want a loan refinance but how do I know if am eligible for a HARP loan refinance?

The answer to this question deserves an article of its own but here are five basic requirements.

-    The loan or mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. If you don’t know who owns or guarantees your mortgage check below for how to find out. It does not mean you can’t get a loan refinance if your mortgage is not with Fannie or Freddie just that you won’t get it under the HARP program. However many banks and mortgage providers are willing to provide loan refinances for premium borrowers.

-    You are current on your payments. Yes sir, despite what some “experts” might have told you, you DO NOT have to be delinquent in your payments to qualify, in fact that disqualifies you.

-    What you owe on your primary mortgage must not be more than 125 percent of the value (today) of your property.

-    You must be able to afford to pay the modified monthly payments.

-    The loan refinance actually improves your overall and long term financial stability.

Question 3. How do I know if my mortgage is with Fannie or Freddie?

Call your mortgage lender or servicer, which means whoever you pay your monthly payments to and ask about the HARP program.  You can also contact Fannie or Freddie by phone or online and find out directly from them:

o     Fannie Mae
1-800-7FANNIE (8am to 8pm EST).
www.fanniemae.com/loanlookup

o    Freddie Mac
-800-FREDDIE (8am to 8pm EST)
www.freddiemac.com/mymortgage

Related posts:

1. Loan Refinance Simple Answers: Profitable Refinancing and Underwater Loans
2. Mortgage Modification Sponsored By The Government, What Is Harp
3. Loan Modifications and FHA Refinance What Is The Deal

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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

Foreclosure, bankruptcy, unemployment are problems that seem so large as to become apparently insurmountable for many of its victims. That of course is one of the worst aspects of these crisis, they take away hope and energy out of people leaving them as shells of the people they used to be.

The situation is difficult and there are no easy fixes no matter what sleazy debt relief companies tell you however there are steps you can take to improve your situations. These steps are not magical and they will not guarantee your financial safety, they should however be part of your plan to avoid foreclosure or bankruptcy when in financially dire straits.

Step 1. Talk to your lender.
Lenders need to hear from their borrowers to have a clear understanding of their position. Imagine if you lent some money to two friends. One of them explains he has lost his job and cannot pay you as fast as he had hoped but presents to you a revised schedule with smaller but regular payments. The other friend has also lost his job but decides to ignore you and will not even explain his situation to you. Who would you be more inclined to give a break or treat kindly? Yep, banks feel the same way.

Step 2. Contact approved housing counselors.
There are plenty of debt relief companies willing to take your money to “help” you refinance or modify your mortgage. Some of them can help others are frauds. It pays to contact legitimate counselors throught the Department of Housing and Urban Development to make sure you are dealt with fairly. These counselors can help you for free and offer unbiased advice.

Step 3. Don’t pay for services you haven’t received and always sign a contract.It is against the law for debt relief companies to receive payment before they sign a contract explaining the services they will provide and before they actually carry out those services. Don’t be duped by companies that promise to reduce your loan and ask for payment before they do the work.

Step 4. Do not transfer your home to a debt relief company or “rescuer”.
A popular scam the Treasury and HUD departments are warning against is being carried out by fraudulent debt relief companies. They will tell you, you need to transfer ownership of your property to someone with a better credit rating so he can refinance your home and you can later on repay it. Obviously this is a scam to steal your home and rape it of any equity it might still have.

Step 5. Only pay your mortgage payments to your lender. Some scam consultants offer to take over the details of paying your mortgage as part of their debt settlement services. There have been many reports of debt relief companies pocketing the payments without making payments.

Related posts:

1. How To Avoid Foreclosure By Declaring Bankruptcty
2. Avoid Foreclosure With A Personalized Home Loan Modification
3. Mortgage Scams: How To Avoid Them

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A balloon mortgage is one in which monthly payments are made for a pre-determined period of time, with the balance of the loan paid in full at the end of the loan term. Like an ARM, interest rates on a balloon mortgage are typically lower than on a fixed rate mortgage and this makes the monthly payments on a this type of mortgage are very low and affordable. Balloon mortgage loans are calculated to amortize over a longer period than the due date of the balloon. A balloon, or lump sum, payment is required at the maturity of the loan to completely pay off the remaining principal. Therefore its important to keep in mind that the terms on a balloon mortgage are insufficient to completely amortize the loan.

Balloon mortgages can, and often do, contain a contractual opportunity to refinance at prevailing rates when the balloon payment is due. If the balloon mortgage loan has the option to be refinanced when the initial period expires, it will be called a convertible balloon mortgage. Some balloon mortgages come with “reset” clauses that provide for the original lender to reset the loan terms so that the loan is fully paid off in the remaining twenty three to twenty five years. The advantage of a balloon loan with a reset is that the loan payment will remain constant for the remaining life of the mortgage. The disadvantage is that the borrower is subject to the then current rates. If you are unable to convert or refinance the balloon mortgage, you may be forced to sell your home to make the loan whole. However, for the initial period of the loan, the interest rates on a balloon mortgage are usually a little lower than a comparable Adjustable Rate Mortgage.

Alternatively, with a fixed-rate mortgage you’ll have the benefit of knowing exactly what your monthly payments will be for the entire term of the loan. Because few people have the funds to fully pay off the balance due at the end of the balloon term, when using a balloon mortgage as the instrument of financing, the borrower should be concerned about future interest rates because they will be subject to them when the loan matures. However, most people that take out balloon mortgages assume that they’ll be moving within the term of the balloon period or that they will be eligible for a more attractive loan at the end of that period. Many people also use balloon mortgages to get that larger dream house. This strategy can, in fact, be fairly risky and a borrower should consider the market risk against the benefit of a larger home. Again, at the end of that period, the borrower must pay off the loan in full – this is the “balloon” payment. For example, a 7 year balloon calculated to amortize over 30 years will have low payments for 7 years and then the remaining balance will be due.

Before borrowing it’s important to consider whether you already have too much debt, whether you will be able to service the debt if you refinance at the end of the balloon period (or pay the balance), the risks associated with the current real estate market, and other factors as well. While it can be fairly easy to make the monthly payments on a balloon mortgage, it is very important to consider that there could be difficulty in managing the terms of the loan once it matures. In the current climate, fixed-rate mortgages are definitely the “loan of choice” for homeowners seeking a refinance mortgage, but if all the factors are considered and risks weighed, a balloon mortgage can be a viable alternative. Loan programs vary depending on the borrower’s credit, closing costs vary from state to state, work with your loan officer to get a proper estimate when you apply for your loan.

 The perfect plan for refinancing your mortgage

You have thought about it but never taken the plunge. You have been told it is risky, or maybe you are simply scared of making a financial mistake that could cost you more than you can afford to lose. 
All these are good reasons to think twice about refinancing your mortgage and although this article is by no means selling the idea of refinancing your mortgage it will provide some reasons why refinancing your mortgage can be a good idea.

Let’s start with the basics. What is a mortgage?
A mortgage is a loan where the security is your home. In other words if you don’t pay the loan and the interest on your loan you lose your house which is sold to cover the principal (pending amount) of your loan. What is important here is that all mortgages are the same, the only thing that matters is the interest rate you pay and some basic conditions like what penalty must be paid if you pay back your mortgage early. Apart from those basic conditions it doesn’t matter if you get a loan with the biggest bank in the world or your next door neighbor. What does this mean for you and me?

It means that if you have the opportunity of switching your mortgage with another supplier or with the same supplier at a lower interest rate it is probably a mighty good idea. Unfortunately many people don’t actually understand what refinancing a mortgage actually means. A bank or lending institution that is offering to refinance your mortgage at a lower interest rate is basically offering to buy your house off the bank that holds your mortgage (at least the percentage they own) and sell it back to you for less than you were paying for it before. Why would a bank want to do that? Well they are actually investing in the promise that you will pay your mortgage and are willing to accept a lower rate of return than your old bank or mortgage provider was when you first signed your mortgage. This is often because the going rate of interest has dropped and everyone is willing to invest money for a lower return.

There is however another way of refinancing your mortgage. Some banks or financial institutions will offer to increase the principal on your mortgage or increase the time you have to pay for it while keeping the interest the same or even increase it. This is becoming rather popular recently because people are struggling to pay for their mortgages at the current interest rates.

Lets explain this a little better. There are three main ways or reasons to refinance your mortgage:

1) You need more cash and refinance your mortgage so that your bank or a new bank gives you more cash with your home as security.
2) You want to pay less every month because you are struggling to meet your monthly expenses so you lengthen the tenure (the length in months or years of the mortgage), this reduces your monthly expenses but increases the interest you pay for the money you borrowed and therefore makes your mortgage more expensive although more affordable if you depend on a monthly income.
3) You simply refinance the same mortgage at a lower interest, reducing the cost of the mortgage.

These three types can be combined with each other in a variety of ways. For instance some smart people refinance their mortgage at a lower interest and reduce the tenure of the mortgage. This way they reduce the overall cost of the mortgage while keeping their monthly expenses similar.

What are the risks? This is where the perfect plan comes in.

The risk with refinancing your mortgage is that you will be tempted to borrow more money making your mortgage unaffordable causing you to default on payments and lose your home. The perfect plan is to not borrow more money but reduce the cost of your mortgage by shortening the tenure, lowering your interest or both.  Of course your circumstances might be that you really need the extra cash and that this is the main reason you are looking for a mortgage.
However as far as it is feasible be smart, don’t fall into the trap of ever growing mortgages and take control of your debt.

Related posts:

1. Do’s and don’ts of mortgage refinancing.
2. Mortgage Refinancing For Underwater Borrowers Now Available
3. Home Loan Refinancing Anti-Foreclosure Effort Results Disclosed

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3. Home Loan Refinancing Anti-Foreclosure Effort Results Disclosed

An increasingly  popular alternative to foreclosure is the loan modification, an agreement where the bank and borrowers reduce the cost of the loan for a period of time to allow payments to be made on time.  A loan modification is much like a mortgage refinance in that the objective is to find you a more affordable mortgage payment for your financial situation.  Refinancing your existing mortgage to obtain a more affordable mortgage payment could still be an option.  However loan modification is often the best solution for the homeowner that has incurred a financial hardship that prevents other mortgage financing or payment options. The purpose of a loan modification is to help make the loan more affordable to the borrower.

A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.  Loan modification is a relatively new term for most people, but with the current market conditions and mortgage crisis, it is becoming increasingly popular.  When possible, loan modification is a preferable alternative to bankruptcy.  Additionally, loan modification is a more fiscally  attractive solution for any lender.

Loan modification programs are typically designed for homeowners who are having difficulty making their mortgage payment, but who can’t qualify to refinance their mortgage.  Loan modification may include reducing the interest rate, extending the term of the loan from 30 to 40 years, or adding missed payments to loan balance.  Loan modifications are not the same as debt consolidations, refinancing loans, or even forbearances.  Loan modifications stop foreclosure proceedings and instead reinstate the loans as they are being modified.

The lenders motivation in modifying a loan is that this is a better alternative to foreclosure.  However, homeowners today are under the false impression that they cannot apply for a home loan modification if they are not in foreclosure.  A loan modification allows the lender to transform a non-performing asset into a performing one and avoid the cost of foreclosure.  The bottom line is that a loan modification is intended to reduce the payments for the borrower, make it more affordable, and reduce the risk that the homeowner will default on the loan.

So here again, loan modification is preferable, in that a renegotiated loan agreement allows you to keep paying down your monthly mortgage while maintaining your credit rating.  Whether it’s reducing the borrower’s note rate or monthly payment, or extending the maturity date, a loan modification is a possible option for a borrower in default.

Understanding the plight facing homeowners today and the very real threat of foreclosure,  assistance during the process of applying for a loan modification is essential. It is important to make the lender work with the homeowner to provide the best possible solution before it is too late.  In the final analysis, loan modification is usually preferable to filing for bankruptcy and is a fundamentally sounder strategy than defaulting on the entire mortgage and creating costly foreclosure proceedings.