how to slash your mortgage payment

8/8/2019 How to Slash Your Mortgage Payment

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How To Slash Your Mor tgage Payment Wi th Loan Modi f ica t ion

Table of Contents

INTRODUCTION 2

ARE YOU ELIGIBLE FOR LOAN MODIFICATION? 2

WHAT IS A HOME LOAN MODIFICATION? 3

STEP 1: LETS GET STARTED! 5

WHAT DO I NEED TO GET STARTED? 5

STEP 2: CALCULATING EXPENSES 7

CALCULATING NET DISPOSABLE INCOME 7

STEP 3: THE HARDSHIP LETTER 10

WHAT A HARDSHIP LETTER SHOULD INCLUDE 10

STEP 4: THE FIRST CALL 12

ASKING THE RIGHT QUESTIONS 12

STEP 5: FOLLOWING UP 13

THE IMPORTANCE OF FOLLOWING UP 13

APPENDIX VI: COMMON QUESTIONS & ANSWERS 14


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I n t r o d u c t i o n

This short publication is an effort to provide guidance and knowledge to allow the

homeowner to first understand the loan modification process, what are therequirements that lenders are looking for and finally what paperwork to completeand how to complete it.At first glance the amount of in formation and the calculation of income and ratioscan be daunting, but anyone with patience and persistence can complete theprocess and get a loan modification approval. To be totally frank I w ill say its notan easy process and as a homeowner you are at a disadvantage in negotiatingw ith the lender; reason being that the homeowner has no point of reference as towhat terms, programs and rates the lenders are approving. The bank negotiatorsare aware of this and w ill get best deal for the bank. Also as seen in the CNN videoit can be very frustrating finding the right person to talk to at the banks. Becausewe speak with loan mitigation personnel everyday we know w hom to speak to get

files approved.If your goal is to keep your house please consider hiring an expert to assist you inprotecting this most important part of your financial future. Over the term of yourloan a better negotiated loan modification will save you thousands of dollars.Please keep in mind we do not collect any upfront fees and you will not owe usany fees unless we get your loan modification approved.

Am I eligible for a Home Affordable Modification?Answer these questions:

1. Is your home your primary residence? Yes No

2. Is the amount you owe on your first mortgage equal to orless than $729,750? Yes No

3. Are you having trouble paying your mortgage? Yes NoFor example, have you had a significant increase in yourmortgage payment OR reduction in your income since yougot your current loan OR have you suffered a hardship thathas increased your expenses (like medical bills)?

4. Did you get your current mortgage before January 1, 2009? Yes No

5. Is the payment on your first mortgage (including principal,interest, taxes, insurance and homeowner's association dues,if applicable) more than 31% of your current gross income? Yes No

If you answ ered yes to all 5 questions you are eligible.
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Wh a t I S a h o me l o a n mo d i f i ca t i o n ?

A home loan modification is the change of your current mortgage terms to new and different

terms. This could mean anything from reducing how much you owe on your mortgagebalance to lowering your interest rate or even permanently fixing your adjustable rate. Howis this good for you? It keeps you in your home! A bank does not want you to walk awayfrom your home if you are late on your payments, or even if you think you might start beinglate. Imagine what would happen: the bank would collect no more interest, they would haveto pay your property taxes, they would have to list the home for sale and/ or market it forup to two years, keep the lawn looking nice if possible and pay for all attorney and courtcosts. This could cost a bank upwards of fifty to sixty thousand dollars. We all know this isdefinitely not the environment for banks to be shouldering such high costs.

A lender would much rather work with you to keep you in your home by modifying theterms of your mortgage note, usually at no cost to you, to something you can affordcomfortably as long as you still have a job. It is hard for anyone to ask for a home loan

modification when they no longer have a job. Think about it: even if the bank did cut yourmortgage payment in half how would you make your payment if you had no job orincome? Borrowing money from parents or friends does not count as it is not guaranteedthat they will provide you with additional money in the future.So how do we classify home loan modifications?

A home l oan m od i f i ca t i on m ay i nc lude any o f t he f o l l ow i ng : Foreclosure Prevention Principal Loan amount reduction Interest rate reduction Permanently fixing or extending an ARM loan Term extension (30 year to 40 year)

Catching up payments Loan forbearance Deed-in-lieu

Cou l d you exp l a i n each t o m e? Foreclosure prevention occurs when a bank starts working with you to keep you in yourhome. They may have already served you foreclosure papers threatening you with a lawsuitto sell your house and kick you out. Foreclosure prevention can be initiated by yourself, aloan modification company or an attorney. It is simply the process of stopping a home frombeing sold by bank and requires action on your behalf. You cannot simply sit idle hoping thebank or the government will do something to save your dream home. YOU need to takeaction first and show that You cannot simply sit idle hoping the bank or the government willdo something to save your dream home. YOU need to take action first and show that YOU

want to keep your home!

Principal loan amount reductions is the process of a bank reducing how much you oweon your loan. For example if you owed a two hundred thousand dollar loan and the bankreduced that to one hundred thousand dollars, they have in effect reduced your principalbalance or how much you owed at no cost to you.


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Interest rate reductions are the most common form of home loan modification. Alender would look at your income paperwork and determine that your current interest rate istoo high and subsequently reduce it. In addition they may also adjust the term to reflectinterest-only payments so that your monthly mortgage payments would go downsignificantly. In this case you would be paying no principal at all and your monthly mortgagepayment would be applied to interest only. The advantage here is a very low payment. The

disadvantage is that you would not be reducing your principal balance at all unless youmade an additional payment on top of your minimum payment due.

Permanently fixing or extending your ARM (Adjustable Rate Mortgage) term. Let mefirst begin by saying that the more common of the two is the second. Banks would ratherplace you in a five to ten year ARM rather than fix your rate for thirty years. They simplymight lose too much money by fixing your rate for thirty years and would be willing toextend your ARM for five to ten years instead. In most cases this is ample time as mosthomeowners do not stay in their homes for ten years.

Term Extensions. In some cases this scenario makes sense: if you are already in a fixedrate for thirty years, for example, it may be wise to extend your term to forty years. Thiswould effectively lower your monthly payment as you are stretching the repayment term

over an additional ten years.

Catching up payments is the predominant form of home loan modification as it gets acustomer who is late on their mortgage payments caught up completely and start fromfresh. This is usually done in conjunction with the lowering of your interest rate but maysometimes be done alone. The decision is always that of your bank to make.

A loan forbearance, and quite possibly the least form of assistance, is when the bankraises your current mortgage payment for a set time, usually twelve months, to help youget caught up on the few payments you have missed. Suppose you missed one mortgagepayment and you usually pay one thousand dollars per month. Forbearance would mean thebank could raise your payment to eleven hundred dollars for the next ten months, for

example, to help you get caught up on the one thousand dollars you fell behind on. This isof no help to someone whose income has gone down and may cause more hardship.

A deed-in-lieu is another way of dealing with a mortgage default that will require thecooperation of both the lender and the borrower is to transfer the property by means of adeed in lieu of foreclosure. Fast and inexpensive (legal fees), both parties agree to transferthe property to lender, avoiding the time and expense of foreclosure. Most importantly, theborrower may avoid the possibility of the lender pursuing them for a deficiency judgment.


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STEP 1:

LETS GET STARTED!

W h a t d o I n e ed t o g e t s t a r t e d ? I will first start with the requirements of a typical employee who gets paid by W-2 wageearner. If you receive a paycheck with taxes and social security taken out you are a W-2employee the W-2 is what is given to you at the end of the year to file your taxes and seehow much refund (hopefully!) you receive. Start gathering the following:

1. Your most recent pay stub2. Last years W-2, all of them if you have worked for more than one company the

previous year3. Your last two months bank statements (all pages that are numbered)4. Your most recent mortgage statement.

Simple right? Okay. If you are self-employed or sub-contracted (1099) gather thefollowing for now:

1. Your last three months of business bank statements (all numbered pages)2. Your last three months personal bank statements (all numbered pages)3. Last years 1099, all of them if you have subcontracted to more than one employer

As a self-employed or sub-contracted employee you may also be required to provide thefollowing items at the banks discretion but you do not need these right now. Every lenderhas a different requirement and they may ask for none, one, a few or all of the following:

1. Last two years of business tax returns2. Year to date profit and loss statement signed by your accountant3. Business or occupational licenses

I s t he re any th i ng e l se I n eed t o i nc lude i n m y m od i f i ca t i on package? Although not required, I would include a copy of my Zillow report. Zillow is a companywhich specializes in online appraisal and comparative analysis of your home. Once you typein your home address it will spit out what it thinks your home would appraise for based onrecent sales in your area. You can access this website at www.zillow.com. Once you obtainthe value of your home through the website, print up a copy of the free report and include itin your package as it will give the lender more reason to modify you, especially if you owemore than what your home is worth.

Okay , I ve ga the red every t h i ng , now w ha t? The next step is to write a hardship letter explaining what happened. The hardship lettertells the bank your story: why you fell behind or, if you arent late yet, why you believe youmight fall behind soon. You need to be precise but dont write a novel odds are they onlyhave a few minutes to review each letter. You need to not only tell them what happened butwhat payments you think you could afford and sell your honesty; that you will make those
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payments, that you wont fall behind again and that you are a person of good moralcharacter. Make them feel good: remember they might be losing tens of thousands ofdollars modifying your loan for you. They are doing you a favor, no matter how much theyare hurting financially they are the holders to your mortgage note and can choose toforeclose on you at anytime. Treat them with respect, dont point fingers work towards amutually beneficial solution for you and your family.

Rem emb er : The Voice o f ReasonI say this because I have encountered far too many times individuals who are given the bestmortgage terms, payments cut in half or more, and who believe that it isnt enough.Granted, if a bank only cut your payment down by thirty dollars I could understand why youwould be upset. However, If the lender cuts your payment by twenty percent or more youshould be excited and thankful.

There are thousands of people with great credit who refinance to lower theirpayments by a couple hundred dollars a month. If your payment gets sliced by a thirdor so, you shouldnt begrudge the bank for not doing more. Use the voice of reason. Toomany times I have seen great scenarios go to waste because the customer decided theterms were not good enoughand the bank, insulted, decided to foreclose on them. At that

point the customerspleaded for a second or, in some cases, a third chance but to no avail.The home wentinto foreclosure and the families were kicked out.My advice to anyone is not to play with fire. Banks are smartening up they do not wish toplay games with anyone. They are in the business of making quick executive decisions.They do not have time to entertain ridiculous counter-proposals. Remember: they madetheir decision based on how much you have in the bank and the income documentation youshowed them. They chose to reduce your mortgage payment at no closing cost to you,saving you upwards of several thousand dollars of fees that someone with excellent creditwould have to pay!

I s t he re a w ay t o f i nd ou t i f I p re -qua l i f y f o r a home l oan mod i f i ca t i on

be fo re s t a r t i ng t he p rocess?

Absolutely. the question grid is shown below and will determine your eligibility for homeloan modification assistance based on current guidelines. Eligibility criteria may change atany given time, multiple times a month, so do not be discouraged if the website tells youthat you are not currently eligible. I would send the hardship package anyway and stay intouch with your lender you will at least guarantee yourself that they will have yourpackage on file and ready to process once guidelines change.


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STEP 2:CALCULATING EXPENSESThis simple step is probably the most misunderstood and leads many borrowers to getdeclined for home loan modifications. What do we do when we get a flyer or statementinsert from our lender asking us to call them if we are in need of hardship assistance?Most oftentimes, we call them! One of the biggest pitfall that leads to modifications beingdeclined is because customers do not do their homework first before contacting theirlender.

H o w a m I s u p p os ed t o k n o w t h i s ? I m n o t a m o r t g a g e b a n k e r .That is precisely why I am addressing it now. This common error can easily be avoided andlead the way to a great loan modification! Calculating expenses properly takes less than a

half hour and is the core basis that determines a successful home loan modification.The rest is all about following up and calling your bank to make sure they are working onyour file diligently. Do you believe that home loan modification shops out there are chargingupwards of several thousand dollars to calculate this simple step for you? The only otheritems relevant to preparing a successful modification package is gathering the incomedocuments which we reviewed in the previous step and writing a solid hardship letter.So what are your expenses? Well, it is natural to assume that any monthly obligationshowing up on your credit report could be an expense, such as car loans or credit cards. Inaddition to those you will have non-credit related expenses such as:

Utility bills i.e. cable, electric, water, telephone Child support payments

Dependents (school tuition, clothing) Medical expenses Gas Home or car maintenance cost Groceries Any other bill you deem important and necessary Do not include frivolous or unnecessary expenditures such as trips toHawaii, extravagant or frequent dining bills unless for professional reasonsor any other reason that could demonstrate financial irresponsibility andmoney mismanagement!

I have included the expense worksheet in the Appendix section which you can fill outand includes the most common household expenses. When filling out the expense

worksheet make sure you write your current monthly mortgage payment, not the paymentyou would like to have. If this payment includes your escrows (home taxes and insurance)then you can leave it as is if you pay your taxes and insurance separately make sure youbreak these down to a monthly basis and include them on your monthly expense worksheet.Any expense which is paid in one lump sump, such as school tuition, should be broken downinto an approximate monthly number; so if you pay $1,200 a year for your sons schooling,then your monthly expense would be $100 per month and that is the number you would


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pencil into your expense worksheet. The expense worksheet is easy to fill out be truthfulin the numbers. Do not inflate or reduce dollar amounts. This is crucial for a bank toproperly modify a loan.

N ow w h a t ? The next step is to calculate the most important number: your net disposable income.

The net disposable income is whatever you have left after you have paid all of your bills. Inorder to calculate it we need to figure out what you bring home every month, not what youget paid. What do I mean by this? I am not looking for your hourly, weekly or monthly wagefigure. I am looking for the amount you actually deposit in the bank after taxes, insuranceand other deductions are taken out. In the case of someone who makes a gross of lets sayten dollars an hour and works a normal forty hour week, that would give us a gross of fourhundred dollars a week. What they take home, however, might be three hundred dollars aweek this is called the net income and that is the figure we are looking for.

If you are paid weekly take your net weekly income, multiply it by 52 weeks in a yearand divide it by 12 months in a year. So $300 a week would mean = 300$ X 52 = $15,600yearly net income. We need the monthly net income so divide that by twelve: $15,600 / 12= $1,300 per month. A month isnt exactly four weeks so do not short cut by multiplying

your weekly income by four. Your income figure will not be accurate.

if you are pair every two weeks take your net bi-weekly income, multiply it by 26 (payperiods per year) and then divide by 12 months in a year. So $600 every two weeks wouldmean = $600 X 26 = $15,600 yearly net income. We need the monthly net income sodivide that by 12: $15,600 / 12 = $1,300 per month.

If you are paid on the 15th and 30th of every month (bi-monthly) take yourbimonthly net and multiply it by 24 (since you get paid 24 times per year: twice a monthand there are twelve months in a year). Suppose you get paid a net of $500 every payperiod, multiply this by 24: $500 X 24 = $12,000 net yearly income. Then divide by 12 toget the monthly net income: $12,000 / 12 = $1,000 net monthly income.

Ok a y , so I h a v e fi g u r e d o u t w h a t m y n e t m o n t h l y i n co m e i s an d w h a t m y m o n t h l y b i l l s a re . W hat do I do now ?

We are now going to figure out what your net disposable income is using an example!Suppose you take home seven hundred dollars a week. Using the guiding points above Iam going to determine my net monthly income. $600 per week X 52 weeks in a year =$31,200 net yearly incomeNow we convert this to a monthly number:$31,200 divided by 12 months in a year = $31,200 / 12 = $2,600 net monthly income!Easy right?

Now we take your monthly bills:

Current mortgage payment with taxes and insurance $1,100 Car payment $400 Car insurance and approximate maintenance cost $100 Groceries $400 Medical bills (dental, vision, etc) $50 Utilities $300 Gas $100


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Add all these up for a TOTAL of $2,450Now we said your net monthly income was $2,600Your monthly expenses above total $2,450Your net disposable income is = net monthly income monthly expensesWhich in this case is $2,600 net income - $2,450 monthly expenses = $150

W hat d oes t h i s m ean? This means that after you pay all your necessary bills you are left with one hundred and fiftydollars at the end of the month. That is a very low figure and spells financial disaster. Whatif, God forbid, you got into a car accident? How would you be able to pay for bills when youcannot even save because money is so tight? There is no way you could save money in thissituation for impending hardships.

W hat i f I am se l f - emp l oyed and do no t r ece i ve a paycheck? The two most common methods banks use to calculate your net disposable income is toaverage your last two years net business income (profits/ loss) by averaging the twoyears net profits (adding them and dividing by two). Unfortunately, most business ownersshow a loss or very little income due to numerous write offs and, sometimes, cominglingof personal and business accounts. In the latter case a three month profit and loss can be

created by your accountant the statement will reveal how much you net after all businessexpenses have been paid. Remember, this isnt a time to be writing all income off; shouldthere be no income left over your modification may very well be declined. If you gross tenthousand dollars a month off of your restaurant, and your overhead, payroll andmiscellaneous expenses are five thousand dollars you are left over with a net income offive thousand dollars. You are not filing your taxes with your lender, you are showing anaccurate picture of your finances at the current time. For the purpose of calculating netdisposable income, your net income after operating expenses are taken out is what you willuse from there you subtract your household and other personal expenses and you will beleft with your net disposable income.

For Example:

Mikes Restaurant grosses ten thousand dollars per month; as we discussed above, afterpaying his rent, payroll and other business related expenses Mike is left over with fivethousand dollars.

$10,000 gross income - $5,000 operating expenses = $5,000 net business incomeFrom here we calculate net disposable income by subtracting all personal expenses fromthe net business income. Mike has a current mortgage of three thousand dollars permonth and a car loan of one thousand dollars per month (he loves fancy sport cars). He hasno other bills.$5,000 net business income - $3,000 current mortgage payment - $1,000 carpayment = $1,000 left over or net disposable income.

W here does my ne t d i sposab l e i ncom e need t o be?

If I told you then everyone would adjust their expenses so that it looked best to the lender,right? The truth is there is no concrete answer to this question. Be sure to state yourexpenses truthfully. A net disposable income of six hundred dollars or more, for a singleperson, may be deemed healthy by your bank and so arises the question of whyare youlate if you make enough? This could be because you suffered a medical condition which keptyou out of work for several months, for example.


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If you do not have an explainable hardship and your net disposable income is over sixhundred dollars then you need to cross your fingers in hopes the bank will modify your loan!Remember, a modification is a hardship-based assistance program. It is not an applicationfor a refinance.

Once you have completed this step, you have made the biggest step required to

get a modification approved. Is it w orth paying someone else three thousanddollars to do this simple step? NO!So far we have covered income documents needed for a home loan modification and theexpense worksheet, which can be found in Appendix I. You can add the worksheet to yourloan modification package but in most instances this information is taken by your bank overthe phone, or your lender may use their own form. You have written down your majorexpense categories so all you will have to go is to copy them down onto the banks ownform.Important Note to financial professionals: we are NOT calculating debt to incomeratio as some of the bills above are not shown on credit reports and wou ld notaccurately reflect your TRUE debt to income situation if looked at by conventionalDU/ LP means. If you do not understand what I just said good. You need notbother w ith methods mortgage professionals may be accustomed to.

STEP 3:

THE HARDSHIP LETTERA hardship letter could be as simple as two sentences describing your situation and what

you will do to improve it. Would I recommend writing only two sentences? Absolutely not,unless you have the uncanny ability to relay a full story in a handful of words. I wouldrecommend a couple of paragraphs, the first explaining what happened to you, whatchanged over the past year to cause you a hardship and how it has affected you and yourfamily. Make sure you talk of your children if you have any. Dependent expenses play asignificant role in getting a modification properly reviewed by your bank.The second paragraph should detail what you will do if you get a modification. Lenders wantto know you are a person of good moral character and judgment. They want to know thatby modifying you they have indeed made a sound decision. Did you know that almost half ofall modifications made in the last twelve months had fallen behind a second time? Banks aregetting more wary of bogus hardships to buy a homeowner more time to live in the homefor free - before ultimately walking away from it. This demonstrates lack of moral character.Promise the bank you will pay them back on time if they reduce your payment. Thank them

for their time. Remember: they do not HAVE to do anything they could simply forecloseand write off the loss.

So w ha t shou l d a ha rdsh i p l e t t e r i nc l ude? It should be written in clear and simple English with the summary points of your presentsituation. You do not need to crack open a thesaurus and use expansive words. This is not aspelling bee or a textbook meaning contest. It is important that the person reading your


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story is not focusing on the words but the actual contents and what you are trying to say.Keep it simple.

Include the following in paragraph 1: What is your hardship? (Medical illness, loss of job, cut in pay, etc) How has it affected you and your family?

What was your household pay before and what is it now? Are you late on your house? Explain to them why. If no t late do you anticipate being late? Explain why.

In the second paragraph explain the following: What payment you think you could afford Your promise to pay and good intent Your good character and how you did not intentionally fall behind (i.e. you

didnt plan it so you could live in the house for free) Thank them for their time and give them your best contact phone numberSimple isnt it? It doesnt have to be long and complicated but it has to cover the basic storyso that someone who has no idea who you are can read it, and easily assess your hardship.It has to make sense. If you say you were sick for a few months but your pay stub shows

you never missed work and are on track to make the same amount of money this year asyou did last year you clearly are misrepresenting the truth. You will most likely be denied.

A hard ship letter should include the following: If handwritten needs to be clearly legible, if you cant read it they definitely

cannot read it! Preferably typed Dated Signed

I have included copies of hardship letters for reference in Appendix II. Please feel freeto use any of these as a roadmap to your own letter.

Examples of hardships could be: Temporary loss of a job which caused you to fall behind on your bills Serious self illness or illness in the family Death in the family A cut in wages which has caused financial hardship (i.e. lower commissions, cut in hoursworked, reduced salary due to a new job, etc) An adjustable rate loan which has adjusted and caused your payment to increase beyondwhat you can afford A divorce where a two-household income is now reduced to only one person, namely theone residing in the house A lawsuit or other proceeding which has drained you financially A business which has suffered a significant loss in revenue, thereby causing a personal

hardship on the owner(s)

Remember that in order to obtain a modification you MUST have a job. Althoughsome companies dont even check your pay stubs or that you are employed, mostwill.


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STEP 4:THE FIRST CALLNow that you have collected the most important documents of the home loan modificationpackage, you are ready to call your lender. Find a recent mortgage statement and on itshould be the toll free number to call customer service. Some lenders have alsoconveniently placed their hardship assistance hotline on this statement, in that case call thehardship number.

When calling any number make sure you:1. Ask for the loan modification or loss mitigation department. Tell the

representative that you are either suffering a financial hardship or are about too.2. Even if talking to the loan mitigation department, you are not talking to a bank

negotiator yet. The person you are talking to is simply a data entry agent.3. Ask them for the required documents they need to start a modification; do not

forget to get their fax number and to whose attention you should fax themodification package.

4. Get the agents name and extension if possible, and either way write down thedate and time you spoke to the agent. Get a blank sheet of paper we will call the

Conversation Log. Every time you talk to the bank notate on this sheet thedate, time and name of the individual you spoke to. Keep the confirmation ofreceipt on all faxes you send out. Your fax machine should spit out an OK Sentmessage, keep that page for your records as proof the fax went through.

5. Keep all your correspondence, copy of your hardship letter and any financialinformation in a folder titled Loan Modification for organizational purposes.

6. The agent you speak to may ask for a few more documents than I have listed inStep 1, or fewer, this will depend on the bank. Write down all documents neededin your conversation log. Make sure you place the date of your calls next everyentry.

7. Gather all your documents and hardship letter and, with a fax cover sheet, fax allyour documents to the number given to you by the agent; dont forget to write inwhose attention you are faxing it to.

8. As many faxes can get lost it is wise to write down your loan number, whichcan be found on your monthly mortgage statement, on every page that you arefaxing.

9. Make sure to keep a receipt of the Fax Transmittal showing Sent OK inyour folder for your records. If the fax number is busy w aiting until you get

the Sent OK message.

Now that you have completed these steps, and if you have attended my instructionalseminar, is it worth spending upwards of three thousand dollars on a home loanmodification company. Most of these companies dont even spend a total of two to threehours on your file, if at all, and end up charging hourly rates that rival heart surgeons with a


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high school degree? Somehow I can clearly see the attorney generals opinion on thiscontroversial practice; especially that of gross up-front fee collection.You are an educated individual: do not be fooled into thinking you are being told thetruth. Dont be sold, by a salesperson, into a lie.

STEP 5:THE FOLLOW UPWhat now? Youve done everything you had to: you prepared all your incomedocumentation. You wrote your hardship letter by yourself or with the help of a friend orrelative. You faxed all the information to your mortgage lender, so now what? Follow up,follow up, follow up!Many mortgage lenders are SO overwhelmed they often misplace or lose yourpaperwork.Be sure to call your mortgage lender every Tuesday and Friday to follow up with theprocess. This simple call is just to make sure they have not lost your paperwork and that

you are in process. There is nothing you can do but wait at this point.They may ask you to send them additional information at any given time so always stayin touch with them. Dont be afraid of your lender, they need your business just as much asyou need their help. They have hired hundreds of new employees to help clients in need likeyourself.

H o w l o n g d o I h a v e t o w a i t t o f i n d o u t i f I a m a p p r o v e d f or a

mod i f i ca t i on? The average turn time is forty five days. Some modifications can be executed by banks in aslittle as a week but most banks have a huge backlog of clients who have applied forassistance, especially the larger banks. Now is the time to be patient but persistent.Remember to keep following up and never trust anything anyone tells you over the

phone w ithout verifying it first. If a negotiator tells you that you will be approved soon,ask for his name, his supervisors name and by when does he think you should beapproved. You need concrete answers, not estimates. Dont be bullied or shy this is your home. This is the American Dream you have every right to it.


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COMMON QUESTIONS & ANSWERS

Can i nves tm en t p roper t i es a l so be m od i f i ed? Yes, they can however the guidelines for these are much more strict than primaryresidences and require significant hardship. The core focus of lenders is to modify primaryresidences, however individuals who can show that their savings are dwindling due tonegative rent, or soaring payments due to an adjusting rate, such as a subprime orPayOption ARM, could be looked at. Bank guidelines are constantly changing so even if abank were to reject an initial attempt to modify, dont be discouraged. You can try to modifyyour loan every thirty days you would also be showing the bank you are really trying yourbest to work things out with them. The banks want to know that, once modified, you canafford the new payments. They more than likely would not be as generous in theirmodification as they would a primary residence.

W h a t i f I d o n o t w a n t t o k e e p m y p r i m a r y h o m e a n y l on g e r ?

This is the unfortunate option many homeowners are choosing. This partly due to the factmany homeowners do not understand the significant help banks can provide. However, ifyou have explored all your options and you no longer want to keep your home (ie too farupside down) then there is a certain order of modification you should follow. First of all itwould be wise to attempt a modification regardless to show that you are visiting all avenuesand see what the bank is willing to offer. What if they did offer you a principalreduction? That would change your mind right? Write it down in your hardship letter! Writedown your intent to vacate otherwise. Once a modification is achieved but you no longerwant it, you can ask the bank to accept a short sale. A short sale is when someone sellsthe house for less than what they owe on it. If you owed two hundred thousand dollarson your house but you had a realtor list it for one hundred thousand, then you areeffectively short selling your home, below what you owe on it. You do not need to have amodification done first to get a short sale approved it simply wouldnt hurt to try themodification route first. Please see our website at www.Easyhomemod.com for moreinformation about Short Sales

I ve had my house on t he m arke t f o r a w h i l e at a shor t - sa l e p r i ce bu t n o o n e w a n t s i t ! No w w h a t ? Your only other options now are a deed-in-lieu or a foreclosure. They are effectively thesame thing one is voluntary the other is involuntary. A deed-in-lieu is the preferred optionwhich occurs when a bank approves your request to deed the house back in their name, andtake possession of it. You are giving the keys back without having to go through thelegalities of a foreclosure. A foreclosure, on the other hand, goes through legal recourse,and attorneys, and is a lawsuit against you to repossess the house due to non-payment.Although it would make sense that a bank would just take the property back in deed-in-lieu

if offered, they wont usually accept it unless they see significant effort on the customersbehalf. Most oftentimes they would rather just foreclose and let their attorneys handle theforeclosure proceedings as the loan may already be written off as a bad account.

Can i nves tmen t p roper t i es be re tu rned t o t he bank as deed- i n - l i eu? Banks are very reluctant to accept investment properties in deed-in-lieu transfers. Thiswould create a serious problem as every investor would probably want to off-load unwantedproperties. Furthermore, a serious moral question would be raised: are these transfers
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legitimate? Is this an easy way out for these investors who caused part of this housingproblem to begin with? Would that be fair?I am not saying some banks wouldnt do this but what I am saying is that you would haveto go through the motions: apply for a modification, then if that doesnt work in your favor,showing proof that the home has been listed 3-6 months on MLS, and if that doesnt sell,then a bank may possibly entertain a deed-in-lieu. The general route for any property

that cannot be afforded to kept is a short sale.A deed-in-lieu is not a commonoption.

W h a t i f I j u s t ch o o se t o w a l k a w a y f r o m m y p r i m a r y , s ec on d o r i n v e st m e n t h o m e ? The biggest danger in doing so, and definitely something you might want to consult with anattorney about, is the deficiency judgment. Suppose you owed one hundred thousanddollars on your home and you walked away and let it foreclose. What would happen then?First of all, the foreclosure would eventually hit and worsen your credit; second of all, thehouse may sell for thirty thousand a year later at an auction handled by the bank or itsagent. The seventy thousand dollar loss the bank has suffered is called the deficiencybalance and guess what happens to you? The bank can write it off as a loss and then sendyou a 1099 income form for this balance. This is an IRS requirement. Any lender whoforgives debt above $600 must issue the forgiven party a 1099C. Thankfully, for most

borrowers, the Mortgage Forgiveness Debt Relief Act of 2007 is their get-out-of-jail freecard when it comes to this 1099 issue. For a minority of borrowers who have to do a shortsale on an investment property, an intelligent professional tax advisor who understandsinsolvency is the best shot at circumventing the tax consequences of a 1099. Ineither case, a 1099 is almost always a better route to take than a deficiency. Under theMortgage Forgiveness Debt Relief Act (2007), taxpayers who were forgiven part of theirmortgage on their primary residence can likely avoid tax liability by including Form 982 withtheir tax return. See IRS Form 982 instructions for full explanation of qualifying criteria.If a true deficiency is acted upon, as is common when someone lets a property go back toforeclosure, it can result in a judgment that a court can order to be collected upon throughgarnishment of wages. Thats scary. It very important when negotiating with lender thatproper measures are taken to avoid the deficiency judgment.

Th i s m a r k e t i s h o r r ib l e I o w e w a y t o o m u c h o n m y h o u s e c om p a r e d t o w h a t i t s w o r t h , sh o u l d I w a lk a w a y ? I firmly believe, and advise, that if something could be worked out with your bank that is inyour favor, work it out. You just never know what mortgage guidelines may be like in thefuture and how do you know prices wont skyrocket once the economy recovers? Just asbadly as people want to sell off in todays market, isnt it logical that it would follow afeverish buying frenzy? Now we need to wait until the market reaches some sort of stability.If the mortgage lender can work payments that suit you, work with them, be responsibleand stay in your home. Buying another home with a foreclosure on your credit may bealmost impossible in the near term.

Do I need t o be l a t e t o qua l if y f o r a hom e l oan m od i f i ca t i on?

Not at all. You do not need to be late to qualify for a home loan modification. Let merepeat: you do NOT need to be late. Anyone can qualify based on the severity of theirhardship. You need to prove that you are having a real tough time, or about to have one remember, modifications are based on hardships not good will. Make sure your bankstatements, paystubs or tax returns accurately depict your story. If you make one hundredthousand a year and your mortgage is only one thousand dollars a month, and you are
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seeking assistance I hate to say it, but something is wrong in the way you handle yourfinances!W i l l you ge t caugh t i n t h e mod i f i ca t i on t r ap? I would first like to state there are many home loan modification companies that do alegitimate and very decent job providing their service. For every one of those there probablyexist ten that are out to get your money and do little to no work. The incompetent ones will

generally appear very educated about the market, may even show up with three-piece suitsand operate in extravagantly beautiful offices, and provide you with smoke-screenexplanations and fake answers. Recent changes in the law will not allow upfront fees beingcharged so stay away from any companies or individuals that want fees before completingloan modification.

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