In the past few months Homeland Assistance has had scores of desperate homeowners contact them that are upside down in their homes and are late on their mortgage as a result of resetting adjustable rate mortgage loans (ARM) call us. Homeland Assistance has had to help them negotiate a note modification with their lender or try to refinance their existing mortgage to help save them from foreclosure.
In nearly every case, a refinance was not possible because there is not enough equity in their home. In each case Homeland Assistance worked with their mortgage companies home retention department and helped them arrange a note modification.
We take every homeowner situation and individually work with the bank’s modification department to try to come to a resolution that is mutually beneficial for both parties. This allows the homeowner to stay in their home with an affordable payment and also allows the lender to avoid the expense of foreclosing on their borrower.
A recently published report shows that nearly 60 percent of borrowers who are behind in their payments are unaware that their lenders may be able to offer them a workout option. This is truly amazing as note modification is most likely their best option for staying in their home.
For those of you who don’t know what a note modification is, it is very simple. The mortgage lenders today are trying to avoid you going into foreclosure because of the lenders cost associated with the process. They have hired hundreds of additional people whose only job is to try and keep distressed borrowers from loosing their homes.
Let’s say you have an adjustable rate mortgage that recently adjusted up and you simply can’t afford it. Or your rate will soon jump and you know that it will be a problem for you financially. You have the ability to work with your mortgage company and negotiate a note modification through the lenders home retention department. The retention department has the authority to renegotiate your current mortgage note and put you in a new fixed rate loan.
It’s as simple as a phone call and a few easy steps.
Most of the banks that Homeland Assistance has dealt with have asked for the same things. One of the first things the lender will want to see is a hardship letter from the homeowner detailing why he can’t afford the terms of the existing Note. Upon receipt of this they send you a form that asks you for some proof of your income and your recurring debts. This is not a new loan so they are simply seeing if they are wasting their time offering you a new deal. The lenders will not be as tough on your debt to income ratio as they were when you took out the loan, so don’t worry about that. Here is an example of a hardship letter for you to review:
To Whom It May Concern:
I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen short and would like you to consider working with us to modify our loan. Our number one goal is to keep our home and we would really appreciate the opportunity to do that.
The main reason that caused us to be late is (insert reason here and don’t be too lengthy and long winded) Soon after being late and our income not being nearly enough, we had fallen further and further behind. Now, it’s to the point where we cannot afford to pay what is owed to (lender). It is our full intention to pay what we owe. But at this time we have exhausted all of our income and resources so we are turning to you for help.
(The approximate date of hardship and we believe that our situation is Temporary or will be Permanent.)
Our situation has got better because (reason here) and we feel that a note modification would benefit us both. We would appreciate if you can work with us to lower or delinquent amount owed and or payment so we can keep our home and also afford to make amends with your firm.
We truly hope that you will consider working with us and we are anxious to get this settled so we all can move on.
Sincerely and Respectfully,
Borrower’s Signature
If you weren’t completely truthful on a stated income loan to get your house it is very important that you be very truthful now. The lenders simply want to make sure you can live up to the terms of the new lower Note and that you will not be in the same situation latter down the road.
Most of the banks we have worked with do not care about what your credit looks like today. If they do choose to pull your credit again it would only be to see if you were not being truthful about your debt obligations.
Lenders have all stressed for the homeowner to be very truthful. We are there to help but we can’t help if you are caught changing or eliminating any information to cover-up any issues.
In most of our cases, the lenders advised our clients they would halt all resets and rate hikes and come up with a reasonable payment to allow the borrower to breathe while the new plan was crafted.
All of the note modifications we have negotiated with have not been modified because the lender cannot always offer the homeowner a workout that is affordable or what the homeowner feels is reasonable.
What we can tell you is that each and every one of the homeowners we talk to would admit that this situation made it feel like the weight of the world was on their shoulders. All it took was having a little hope and someone who understands the process to help them through it and care about them saving their home. They want to save their home but they are lost in the confusion and jargon the lenders put on them about the modification process and have no idea how to play the cards they have been dealt.
Please understand that a note modification will not help everyone. We received a call from a woman named Sue in Florida. She wanted help to work with her mortgage company with a note modification because she said she “couldn’t get anyone to listen to her.”
We did a conference call with her mortgage company.
Sue is upside down in her home. She has an Option ARM that has an optional negative amortization payment and she has been only paying the minimum 1% payment rate on her loan. Sue’s actual rate loan the loan was actually much higher but the loan she had allowed her to put the interest back into the loan on the back end and pay it at a later date. Sue’s balance on the loan is currently $300,000 and she is only paying around $1000 per month. Sue’s loan is now adjusting to the actual interest rate of around 7.500% and she can no longer make the small payment that allowed her to defer her interest.
Her new payment had gone up over double to $2100 and she couldn’t afford it. Sue does not qualify for a refinance at this time because there is no equity left in the home and that same program is no longer available. We worked with the mortgage company and they were willing to offer a note modification, giving Sue a new 30 year fixed rate fully amortized mortgage at 6.250%.
The problem was that Sue’s new payment would be fully amortized and now including principal and interest her new payment would be around $1840 per month. Even though the lender lowered the rate for Sue the payment was much higher. This is because the loan she had before allowed her to make artificially low payments because she was deferring most of the interest back into the loan every time she made a payment. So although the bank felt this was a fair compromise, Sue needed her payment to stay near $1000 per month range which was not attainable and the expectation that your payment is going to stay that low is unreasonable.
It simply isn’t going to work. Note modification is not only to bail you out because you made a mortgage mistake or were misled. It’s to reach a compromise between you and the lender so that you can both move on successfully. You get to save your home. They get to avoid a costly foreclosure and continue to profit on at least a portion of the interest of your loan.
Keep in mind also that if you need help with an investment property that is not your primary residence the note modification departments are not going to be as accommodating with there offer to you. If you truly want to stay in your home, you have to be prepared to compromise in the negotiations as well when you request a note modification.
Homeland Assistance reminds everyone to “Be reasonable. Be willing to compromise. Be willing to help and we will be there to assist you every step of the way.
FORECLOSURE GUIDE