There is a lot of confusion out there as to what home loan or mortgage modification actually is.  I get questions every day about what’s involved, which program is right for me, what’s this Obama program… those are usually followed up by should I do it myself or seek professional help (More on that in another article).

Certainly these are confusing times.  I speak with many homeowners every day who are wondering what is going on and what to do.  The economic downturn we are in has created unparalleled hardship in terms of the homeowner and with the financial sector.

So let’s cut to the chase.  The banks DO NOT WANT YOUR HOME.  What they do want is a performing loan – by performing I mean they want a homeowner that pays their mortgage month in and month out.  Banks are not in the real estate business – they are in the lending business.   If they take back a person’s home then the bank has their money tied up in a home that isn’t earning them any interest or fees.

However, if the homeowner simply cannot make payments then the bank has no choice but to foreclose on the property and take ownership of it to try and recover the principle amount of their loan.  These situations are unfortunate and are happening all around us.  Enter the loan modification program.

It really doesn’t matter if you’re talking about mortgage modification, home loan modification, President Obama’s Making Home Affordable program or any of the other of the many versions of a loan modification.  All these names are referring to same concept that you and your mortgage company have a common interest – to keep you in your home.

Again, the mortgage company is in the business of making money off of loans.  It’s in their best interest to help keep you in your home.  For that reason they are willing to change or modify the terms of the original loan so that the loan is more affordable for the homeowner and they have a higher probability of repaying the loan.

Most homeowners who are experiencing a financial hardship want to stay in their home but are experiencing a decrease in income for one reason or another.  The homeowners hardship and the banks desire to have a performing loan makes a loan modification a perfect match.  In essence you and the bank are partners working together to get through this tough economic situation with a mutually beneficial outcome.

The process of “modifying” a loan refers to the negotiation process that takes place between you (i f you choose to do it by yourself or another person or entity that you have selected to negotiate on your behalf) and your mortgage company.  At the end of this process your mortgage company will present you with new loan terms that may involved any combination of these:  a lower interest rate, extended repayment term, or maybe even forgiveness of a portion of the principle balance owed – all of which combine to lower your monthly payment to a more affordable level.

Once your loan is modified you begin making your newly agreed upon monthly payment.  Your loan is now current with the mortgage company meaning that any late payments are forgiven, waived, or added back into the principle balance of the loan.

There’s much more here to talk about but I’m out of space….  Be sure to check out our website for more details on this subject.

© Justin Richards 2009
Article may be reprinted or transmitted as long as author’s bio below is included with the article

About The Author

In 1998 Mr. Richards graduated from University with a bachelor’s degree in Business Management and Finance. He founded a successful company that helped hundreds of homeowners to get on the path to financial freedom. He also over 7 years experience in the home mortgage finance industry. He loves helping people! Especially when it comes to helping them keep their homes and pay off their debts.

Mr. Richards is happily married with four beautiful children.  He is currently serving as a consultant for SureFast Loan Modification.com

Last Friday, President Obama signed a bill to extend the $8,000 first-time home buyer tax credit to April 30, 2010. In addition to the extension for first-timers, it also added a provision to provide a tax credit of $6,500 to home owners who have lived in their current residence for at least 5 years who are looking to buy a replacement home.

Brief article from Mortgage News Daily discussing the provision:

http:///www.mortgagenewsdaily.com/11062009_obama_signs_home_buyer_tax_credit_extension_will_it_be_effective.asp

With the new law, you must have entered into a purchase contract by the April 30th, 2010 deadline and then buyers will have till June 30, 2010 to actually ‘close’ the purchase contract; so in effect benefits survive until the end of the 2nd quarter as long as you get into contract by April 30th.

(See the announcement on the IRS web-site for a little more about the announcement and to get access to the form needed to receive the credit on your taxes)

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

The announcement is being seen as a positive signal from the government by many, especially ‘would be’ first-time home buyers and real estate professionals.  It was also announced they have increased the income limits to $125,000 for single buyers and $225,000 for couples. Pretty generous, in my opinion.

So the real question at this point is, or at least one of the important questions, will this help the ailing housing market?

Without getting too political, the prevailing wisdom from Washington seems to be this will help motivate those who have yet to take advantage of low-interest rates, and low home values (relatively speaking of course) and it will create economic benefits to the real estate industry, banks, and certainly county & city tax receipts, as the more homes get sold the more property taxes get collected in those areas of the country that collect them.

It is hard to argue that with the low-interest rates, lower home values, and a nice little gift from our federal government, that this is about as good time as any in recent times to buy a home.

Question still remains though will this tax credit actually stimulate more home buying between now and the end of  April of 2010? I think the answer is ‘yes’ but to what degree is hard to predict. The real incentives to buy ‘now’ are in place, low prices and low rates, thus affordability is there for many qualified first-time home buyers already. Does the tax credit really make or break the deal for most of these ‘would be’ buyers? I am not so sure it does.

The buying of a home is nearly always an emotional decision. Home buying is usually made for lifestyle reasons and even those few who make purely financial decisions, it is hard to argue against buying right now with conditions such as they are, forgetting the tax credit. The tax credit is an incentive, but I am not certain whether it is really a ‘deal maker’ for most new home buyers. My opinion is people would have continued to buy up homes at these price levels even without the tax credit, though I am sure some will be motivated by it, just not as many as some think. At the end of the day though, the faster we can get back to a stable real estate market, the better.

Is the tax credit a perfect solution?

It is not, in my opinion, however if we can accelerate the recovery by providing incentives for home buying, even if it only has a small effect, then there is hope we can get into a real economic recovery and start to see stronger consumer confidence, higher employment levels and a turnaround in our deficit spending policy.

One final thought, given the reports of banks holding back significant housing inventory to keep values higher, I predict we will see another extension to this provision in May as it is unlikely that we will be close enough to a stable housing market by then. Realistically, I can see the tax credit lasting through the end of 2010 and quite possibly into 2011.

Jack Arney is a senior mortgage advisor who works for Chestnut Mortgage, Inc in Northern California and the entries on this blog are his opinions and not necessarily the opinions of his employer Chestnut Mortgage, Inc a dba of Opes Advisors, Inc of Palo Alto, CA. If you want to contact Jack please email him jack@ChestnutMortgage.com.

10/29/2009

Dear Ms. Leana Kennedy,

I’ve been in contact with Mrs. Orr. It’s been brought to her attention that my mother is in dire need of serious help. Her situation requires the appropriate attention and exposure and we are hoping you could assist us through this difficult time.

Correspondence have been sent and emailed many times to the White House with no luck in getting this information directly to President Obama and Vice President Joe Biden. We have only received standard form responses that are sent out to millions of Americans. We’re hoping you could please help facilitate this transaction on behalf of my mothers request for she has fallen through the cracks of the system.

We have been in contact with the necessary political offices on this matter as well. We are also currently trying to get exposure through news media both local and national but it has been very difficult. This matter has to be addressed on a much higher level as you can understand. Our request is to have direct contact with the President on what he can do to help. This cause is for a solution to help this senior citizen from loosing her home to foreclosure.

Time is running out. On December 1^st, 2009 the existing loan is scheduled to re-cast to a higher interest rate and higher payment of which she cannot afford, which will cause her to go into default.

Thank you for your assistance in this matter! 

Sincerely,

Betty & Shawn

This is a series of emails and faxes to the White House and their response. There has been other emails and letters but to this point the reply below is the only thing we have received back.

*************************************

FAX 1

Dear Mr. President,

This is a legitimate story of what is currently taking place. It needs immediate exposure and as a daughter I am in dire need of help to prevent this from happening.  As a daughter I have submitted 2 correspondences on 6/2/2009 & 6/24/2009 via certified mail (June 3, 2009 Letter to President Obama) to the Whitehouse without a response.

We are pushing this matter locally and nationally through political offices as well as the news media, talk shows and social media networks. I need your help because time is running out.
Please contact me as soon as possible,
Shawn—–Original Message—–
From: The White House – Presidential Correspondence [mailto:noreply-WHPC@whitehouse.gov]
Sent: Wednesday, October 21, 2009 9:06 AM

Subject: Thank you for your message

Dear Friend:

    Thank you for writing.  I have heard from many families unable to refinance mortgages or obtain loan modifications.  I appreciate hearing your perspective as I work to help more Americans stay in their homes.

      Today, access to the American Dream is being tested by a mortgage crisis that threatens the stability of families, neighborhoods, and our entire economy.  Even if your own home is not at risk of foreclosure, you are still affected.  Even if you have played by the rules and fulfilled all of your obligations, a foreclosure in your neighborhood will have an impact on the value of your home.  This crisis has not only hurt home values nationwide, it has also had a dramatic effect on the credit Americans need to purchase cars, pay college tuition, and grow small businesses.

      My Administration has acted quickly to address this crisis and implemented a housing plan, which can be viewed at: www.MakingHomeAffordable.gov.  It helps millions of responsible families avoid foreclosure by allowing homeowners with mortgages from Fannie Mae or Freddie Mac to refinance at lower rates to make sure their homes remain affordable.  This plan helps us end the crisis without rescuing speculators, dishonest lenders, and those who bought homes they knew they could not afford.  For assistance with a home foreclosure or to find a local housing counseling agency, I encourage you to call the Department of Housing and Urban Development at 1-800-569-4287 or visit: 

www.hud.gov/foreclosure.  If you have a government loan and need assistance working with a lender, you may also call 1-888- 995-HOPE to speak with a housing specialist.

The road ahead is difficult, but if we move forward resolutely– with a deepened appreciation for how fundamental the American Dream is and how fragile it can be when we fail in our collective responsibilities–then I am confident we will overcome this crisis and once again secure that dream for ourselves and future generations.  Thank you again for writing. 

Sincerely,

Barack Obama

To be a part of our agenda for change, join us at www.WhiteHouse.gov

*****************************************After receiving The White House’s response we sent another letter

Dear President Obama,

I am writing back in response to the email sent by your staff at 10:06 am on 10-21-2009. It was appreciated that someone on your staff took the time to reply. This matter is in need of your appropriate attention and exposure and should be brought to your immediate attention directly to you. This matter should be taken seriously of a daughter’s plea for help of a much needed mortgage crisis intervention here in Pasadena, California; time is running out. She is an 86 year old senior citizen caught up in the mortgage meltdown and possibly loosing her home to foreclosure.

This senior was a member of the Armed Forces and has fallen between the cracks of the system as  many others have. No one seems to want to help this senior in saving her home from foreclosure and restore her retired life and well being. We have exhausted all avenues of help including talking with Chase Bank for a loan modification, traditional and your program, refinancing, etc. Chase Bank doesn’t have the interest in helping seniors’ stay in their homes. As a responsible citizen she continues to be current on her payments and maintains an excellent credit rating but when December 1^st, 2009 arrives the loan will re-cast to a higher payment and interest rate of what she cannot afford. She will then be forced into default.

How unfair is this that a person of this age has had to work this hard to get help and door after door continues to close with no resolution in helping her?

We have been talking to the Military Records Center only to find the records center cannot locate and identify any record of her serving in the armed forces. The family was told that all records were destroyed in a fire that took place in 1972 destroying all the records from the year 1959 and prior. The only way now to identify her is to give the VA her C number and if we cannot provide this they cannot help any further. So another door is closed. Where does she get the help now that is needed? Pursuing this avenue was to see if she would qualify for VA benefits…Another door closed! Why is the Government so interested in helping other countries and their issues when they should be focused on the issues of seniors today in our own country?

This home is all she has left and her and her daughter will do what it takes to be heard on this critical matter that affects many others as well. The necessary local Government officials have been contacted such as Governor Schwarzenegger’s Office, Congressman Schiff, State Senator Carol Liu, and Los Angeles County Supervisor Michael D. Antonovich. We are also currently working with local and national media including radio, various newspaper reporters, and live media of various news channels, and moving forward to have this story heard on Good Morning America to expose the truth of what has happened to one woman fighting hard to keep her home.

Americans of this generation should not be forgotten and home ownership is not just an investment; it’s the fabric of our lives, of our nation. This family of two needs your personal attention on this matter. We were disappointed to receive the standard form letter of response that came from the White House. We would appreciate a direct response via phone & a formal letter of response by you.

Sir, as you can understand your support on this matter is much appreciated.

Shawn