LOAN MODIFICATIONS: Can I qualify for Obama’s loan modification plan?

The key components to Obama’s program to avoid foreclosure are through loan modifications and refinancing. He has put forth a strategy to stabilize the housing market by providing homeowners the opportunity to get a loan modification or a refinance. This initiative has been called the Homeowner Affordability and Stability Plan (HASP). Many of us know it as “Making Home Affordable”.
Eligibility is based on the following:

• The property must be your homestead.
• The amount you owe on your property is either the same as the value of the property or slightly less.
• There is sufficient income to begin paying a new mortgage payment.
• The original loan must have originated on or before January 1, 2009.
• There must be a hardship.
• There must be an unpaid principal balance of $729,750 or less.
• Your mortgage payment must be more than 31% of your gross monthly income.

Aside from these eligibility requirements, there are several frequently asked questions that I am faced with on a daily basis, for example:

1. Do I have to stop paying my mortgage to qualify for a modification?

Technically, NO. We are suppose to be responsible individuals and continue paying our mortgage and still qualify for a modification. As much as I would love to say that lenders are providing loan modifications to all individuals that are current on their payments and meet the above qualifications, is not true. There are several lenders that have given loan modifications even to those that are current. However, the majority of lenders are giving priority and providing modifications to those that are at risk of losing their home for non-payment due to some kind of hardship.

I will never advise my clients to stop paying their mortgage, because there are ramifications. Non-payment will affect your credit score and foreclosure proceedings will commence against you. Therefore, for those that have no other alternative but to stop paying, do not lose hope. Consult with your lender or seek the advice of an attorney.

2. Will my equity line be modified
together with my first mortgage?

No. The loan modification program is only for the first mortgage. The second mortgage/equity line will need to be negotiated directly with the Lender or Servicer. It is best to modify the first and know how much money you have left in the month before negotiating with the second. It makes no sense to start modifying the second without knowing if you can even afford the first mortgage payment.

3. What type of interest rate is being offered through Making Home Affordable?

The interest rate may go as low as 2%. The idea is to get you an affordable payment. Through Making Homes Affordable, the first step is to reduce the rate of interest, second the term of the loan and last the principal of the loan. Each step will be given as needed depending on your particular situation and financial status.

4. Will I have to pay the property taxes and house insurance separately?

No. The new loan payment will include a monthly escrow amount for the payment of property taxes and insurance. This will be required.

5. What will happen to all my past due amounts, late fees and/or penalties?

Those that qualify for a loan modification through Making Home Affordable will not have to pay past due late fees. All other cost such as unpaid taxes, past due interest, etc. is usually added to the amount you owe. This also the case for many loan modifications that are not through Making Home Affordable.

The most important information to recognize from this article is that there are options available. The hardest part is acknowledging that you need help. We are all in this together and together many things can be accomplished. My best advice is to call an attorney for a consultation. Know what is available to you and plan your next steps accordingly.

For more information and a free consultation call now 305-254-4492.
Attorney Dania S. Fernandez, The Law Offices of Fernandez & Associates, P.A.,
6705 Red Road, Ste. 310, Coral Gables, FL 33143,
www.daniafernandez.com, email:dania@fap-law.com