Negotiation of a Loan Modification

Right now, millions of homeowners may be eligible for a mortgage modification and not even know they are eligible.  If you have a variable interest rate mortgage and are having trouble making your monthly mortgage payment, or are about to go into default you may qualify for a mortgage modification under the new Home Affordable Modification Program.

Synopsis of the New Regulations:

• Homeowners who have loans that were originated on or before January 1, 2009 are eligible.
• Property must be owner occupied. No investment properties or vacant or condemned properties will qualify.  The unpaid principal balance on your first mortgage must be no more than $729,750.  On owner occupied 2-4 units, there are higher loan limits.
• Borrowers will need to provide proof of their income, their current bank statement, their last two paycheck stubs, W-2 or 1099, income tax returns for the last two years, and a letter explaining why they cannot afford their mortgage payments.
• Lenders and loan services will receive incentives to modify borrowers' mortgages who are current on their payments, but are at risk of defaulting.
• The modifications will be effective through December 31, 2012.  Modifications can only be done once under the new program.
• Participating servicers will be required to service all eligible loans unless the servicing contract prohibits this.
• The servicer must use the net present value of cash flow formula with and without the modification. If the test reflects that the net present value of the expected cash flow is greater with a modification, then the servicer will issue a modification to the borrower.
• A certain order of modification conditions must occur. The interest rate must be reduced first, but by no more than 2% discount.  The term of the loan can then be extended to a maximum 40 year term.  If necessary, the lender may offer a reduction in the principal or refinancing if the borrower qualifies.
• The lender or loan servicer must enter into an agreement with the Treasury Department before December 31, 2009.

Borrowers can hire a mortgage modification company or attorney or other negotiator to negotiate with their lender on their behalf, or they can represent themselves. The key element is the borrow must show they have enough income to make the new mortgage payment. Expect the process to take as long as 90 days or more.

• If you need to see if you’re qualified to Negotiate your Loan and may need professional legal help in doing so, Consult Your Case for Free with a local certified Foreclosure Attorney as they are experts in mortgage modifications.