Many of us have friends or relatives that are applying for a loan modification. It is a confusing world so I would like to give you some information that should be useful.
1. NO UPFRONT FEES
Effective October 11, 2009, the National Association of Realtors helped pass a law to protect borrowers with financial hardships. It reads that “no persons, including real estate brokers/agents and attorneys, may obtain an advance fee for negotiating any form of loan modification.” Unfortunately there are still many brokers and lawyers collecting advanced fees for this service. It is strictly illegal. If you come across anyone who is requesting an upfront fee to modify your loan, please report them to your state attorney general. For California, click on the link: http://ag.ca.gov/loanmod/
2. AGENCIES THAT HELP WITH LOAN MODIFICATIONS
If you are considering working out your loan, there is no need to pay anyone. Go to either of these websites:
www.MakingHomeAffordable.gov or www.hopenow.com
3. TIPS
A. Don’t ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your home.
B. Don’t transfer title or sell your home for a “foreclosure rescuer”. This is a scam to convince homeowners they can stay in the home as renters and buy their home back later.
C. Don’t pay your mortgage payments to anyone other than your lender or loan servicer.
D. Never sign any documents without reading them first. Many homeowners think they are signing documents for a loan modification or for a new loan only to discover that they actually transferred ownership of their home to someone who is now trying to evict them.
E. For more details, click on http://ag.c.gov/loanmod/
4. GOVERNMENT OVERHAULING LOAN MODIFICATION SYSTEM
People have been trying to avoid foreclosure by applying for a loan modification with their lender. Some people have felt they were getting the run around; some would get a trial modification but not a permanent one; and some never heard back in time before losing their home. Lenders have been slow and/or neglected to collect the necessary documents upfront which created a bottleneck of responding to borrowers. So the federal government has stepped in.
The federal government stated on January 28, 2010 that it would overhaul the current system. The new procedure goes into effect June 1, 2010. It will require lenders to get three documents upfront:
a. a formal application including a description of the hardship created by the mortgage;
b. proof of income, which would mean at least two pay stubs or the most recent profit and loss statement for self-employed borrowers; and
c. a form authorizing the Internal Revenue Service to release tax data to the servicer.
Under the plan, lenders will be required to respond within 10 days to an intial request for a modification. Once documents are provided, the servicer will have one month to tell borrowers whether they qualify for a trial modification. If the borrower makes three payments at the modified rate, the modification will automatically be made permanent.
I hope this helps with any confusion but encourage you to also talk with a trusted accountant or attorney.
If you know of anyone who would like to sell their home or would like to buy a home now to take advantage of low interest rates, I would very much appreciate your referrals.
Patricia Norwine www.PatriciaNorwine.com 2/18/2010
