Step 3 Archives – Refinance – Mortgage Refinancing Rates And Information

Loan Modifications, How to Write an Effective Hardship Letter

February 15th, 2010 No comments

Hardship letters are like any type of tale, they must be clear, they must be simple, and must drive your argument like a B52 in a battlefield – powerfully. Unfortunately, many loan modifications get thrown in the wrong stack simply because homeowners fail to explain their situation effectively.

Step 1. KISS

Keep it simple stupid! The hackneyed cliché holds true in hardship letters also. Loss mitigation departments, those that have the fascinating job of reading about every lender and his mother´s problems are overwhelmed with loan modification applications. They don´t want your autobiography, they certainly do not want 10 pages of you crying on their corporate shoulder. A good hardship letter does not have to be more than a page long.

Step 2. Address the Hardship clearly.

The key point you need to make is why you can´t afford your current mortgage, or why you won´t be able to once your mortgage rate adjusts or some other tragedy occurs. This needs to be specific, vague musings on how difficult life is will get you nowhere. Try for a reduction in income, the death of a spouse, illness or a change in the interest rate. It needs to be something specific you can prove not some vague musings on the difficulties of life.

Step 3. Express commitment.

It is very important you make it crystal clear you WANT TO PAY FOR YOUR MORTGAGE. As you probably guessed lenders do not appreciate borrowers changing their mind on paying for a loan they were very happy to sign for when they wanted to buy their home with somebody else´s cash. The letter needs show you do not want to continue delinquent, or become delinquent, but you want to find a solution so you can keep your home and they can get paid for the loan.

Let us illustrate these three points with a sample letter that follows these three steps.

You can use this sample and apply it to your personal circumstances. Keep in mind there is no one “RIGHT WAY” of writing a hardship letter, although there are plenty of wrong ways.

Some feel that a handwritten letter is more personal and has more chances of being empathized with. However, this only works if the handwriting is clear enough to be read easily.

Date:

To: (Lender Name)

Address of lender.

Re: Loan Number. (It is always a good idea to give all the reference numbers and information you can to make things as easy as possible for the loss mitigation officer, keeps him in a good mood)

(STEP 1. Remember to keep it simple and short)

To Whom It May Concern: (Generally it is better to address a specific person, however your hardship letter will probably be read by many people so there is not great advantage in being specific in this case)

The purpose of this letter is to explain the reasons why I am behind in my mortgage payments (or will be soon due to the hardship you are about to explain). After exhausting all my resources I have only one alternative left and that is to apply for a mortgage loan modification.

The main reason I am late in my payments is (STEP 2. Here is where your hardship reason comes, keep it simple and clear, and avoid vague generalities). This has caused me to become further and further behind in my payments. I cannot refinance my home because the value of my home has dropped by xxxx (this is generally viewed as a preferable option to lenders so it is a good idea to explain why it is not possible, which with the number of underwater homes is not difficult)

I am confident that if I obtain a loan modification I will be able to afford my mortgage and pay for the modified loan. I trust you will consider working with me on resolving this situation. (STEP 3. Show you are eager to pay for your mortgage if you are granted a loan modification)

Sincerely and Respectfully,

Your signature,

Co-Borrower Signature (if applicable)

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Top 5 Steps to Avoid Foreclosure without Falling Into a Loan Modification Scam

January 18th, 2010 No comments

The sad reality is that an estimated 4 million households will lose their home to a foreclosure this year. Of course most of them will not go without a fight and will try to reduce their monthly payments with a loan modification.

Unfortunately loan modifications are not easy to come by and only a small percentage of troubled borrowers get a loan modification trial and an even smaller percentage get a permanent loan mod. This has created a practically brand new industry overnight, loan modification companies or consultants. This industry is not regulated allowing practically anybody to hang up a sign and start “working” as a loan modification consultant. This has caused many loan modification scams to crop up. This article aims at helping you avoid the scams and take the right steps to maximize your chances of loan modification success.

Step 1.

Contact your Bank or Lender first as soon as you realize you are going to struggle to make mortgage payments. It is always better to start planning for the worse before you are delinquent on your mortgage. You will need to contact your bank’s or lender’s loss mitigation department and explain your situation.

Step 2.

Be patient. Loan modifications take time and are difficult to get because a) they require plenty of paperwork and b) banks are not overjoyed with the prospect of losing money. However pressure is mounting on banks to stop dragging their feet and some lenders are increasing their loan modification completion rates substantially.

Step 3.

Contact HOPE’s hotline at 1-888-895-HOPE you will receive free help from trained counselors in multiple languages 24 hours a day. Although loan modification companies will tell you that these counselors are not good and that you need to pay to get a good service that has your interest at heart I recommend you give them a try. They are getting paid (obviously) just by the government instead of you.

You should also contact your local HUD approved counseling agency. You can find out where your closest office is by asking at the same hotline number detailed above. It is a good idea to visit a couple of counseling agencies and comparing the counsel they provide. The truth is that loan modifications are not THAT complicated, once you understand the basics and get down to the messy paperwork most people get ahead just fine. Getting approved, well that is just another thing altogether.

Step 4

Beware of loan modification scams. Here are some signals that give them away:

1) Avoid ANYBODY (lawyers, companies or consultants) that asks for a prior fee for ANY loan modification service. Besides being a bad idea for obvious reasons it is illegal in many states.

2) Avoid companies, lawyers or consultants that GUARANTEE your loan modification will be accepted or that they can stop a foreclosure. At best this is wishful thinking of a naïve consultant, most likely there are lies, in any case avoid like the plague.

3) Avoid companies that tell you to stop making payments on your mortgage and pay them instead, this is the litmus test of fraudulent loan modification agencies.

Step 5

If you see evidence of a loan modification scam, or of bad practice with a loan modification company, do us all a favor and report them to 1-888-995-HOPE (4673). Loan modification scams are spreading fast but the Government is working hard to put them out of business. Many District Attorneys’ are making it their mission to put these companies out of business.

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Avoid Foreclosure: 7 steps to save your home.

August 8th, 2009 No comments

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.

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Avoid Foreclosure With A Personalized Home Loan Modification

July 16th, 2009 No comments

Avoid Foreclosure With A Personalized Home Loan Modification

Foreclosure has turned from being a four letter word so taboo it was barely mentioned to a common feature of life we have nearly got used to. Can we avoid foreclosure? Or is the common household doomed to foreclose and buy again depending on the economic climate?
Well although economic pressures can sometimes cause irreversible damage to a family’s income and resources making foreclosure the only way out this does not have to be the general rule. There are steps we can make at every stage of economic hardship to try to avoid the “f word”.

The first fact that we must understand is that nobody likes a foreclosure, banks don’t like them, the government hates them and you and I certainly don’t want anything to do with it. All this begs the question; if everyone hates a foreclosure why have them? The same question could be applied to wars, famine, violence and the answer may be similar. Often one or more of the parties involved simply don’t have the will to continue working towards a positive outcome.

Well, enough generalities and poetic comparisons what can a real family or individual do to avoid foreclosure.

Step 1. Don’t buy a house outside of your means. Obviously if you already own the house this advice comes a little late but for any new home buyers it is great advice to not be swallowed up by the temptation of paying more than you can afford for a house. A good rule of thumb is to not pay more than 30% of your income on your home. This gives you a little bit of a safety net if things go bad and the opportunity of saving a portion of your income for a rainy day.

Step 2. Control spending. Be ruthless. If income and expenditure are not tallying take control of your budget and keep to it.

Step 3. Talk to your bank as soon as possible. Banks hate foreclosures because they more often than not lose money and it is not what they prefer to be doing. They are not estate agents they are banks that want to be making money by lending and investing not sweating the details with a bad house sale. If you approach them before your credit is in the dirt and you provide them with a plan they will try and work with you.
Options open to your bank you might apply for are payment holidays for a determined amount of time if you have evidence that your income situation will change in the future, or a full on loan modification. Remember these modification actually make more money for your bank. What do you think they will prefer, foreclosure or a making more money on your mortgage?

Loan modifications come in a large variety of colors and shades. You can modify your loan to last longer which will make your monthly payments lower. Imagine you owe your bank $1,000 and you need to pay it in three months, $333 and you can’t afford it, so you ask the bank if you can pay the same amount in ten months making it a much more affordable monthly payment of $100. The only glitch with this option is that you end up paying more interest. Another option is to change your mortgage provider to one that is willing to charge you a lower interest. This is a great option that is often combined with a larger mortgage (not a good idea in most cases) and a lengthening of the loan’s tenure (also expensive in interest), the only problem is that changing mortgage providers or even just changing interest rates if your bank is willing to renegotiate terms is often a lengthy process.
The thing to remember is that there are options, the ones we have discussed are just a sample. Talk to your bank or even with a financial adviser and study what options you have, just don’t give up.

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