LOAN MODIFICATION, SHORT SALE OR FORECLOSE?

Within the last 60 days, I've received an increasing number of calls from frustrated homeowners attempting to modify their loans on their depreciated properties with no success.  


While our team does not conduct loan modifications, we work to give these people tips on how best to approach their banks, specifically their mortgage servicer, with the hopes of a successful modification, a loan modification on the homeowner's terms.  It is not enough for the homeowner to state to their mortgage servicer, "my home is upside down in value and I don't want to pay the mortgage on an upside valued home." 


Unfortunately when the homeowner is unsuccessful in obtaining a loan modification, our team informs these homeowners of other options, either short sale or foreclose and not something these homeowners want to hear.  When a homeowner chooses to short sale their property, our team works to make this process as painless as possible.  We are nationally Certified Distressed Property Specialists and very experienced at working with distressed property owners... Please check out my testimonies   on my website...www.myfengshuiagent.com


In the eyes of the mortgage servicer who contracted with the homeowner to lend money to the buyer to purchase their home, the servicer does not see the depreciated market as their responsibility.  I realize this is stating the obvious.  


What most upside homeowners desire is either a principal reduction and/or interest rate reduction.  It is rare the bank will grant a principal reduction and it is more common to obtain an interest rate reduction.  Given this information, it is up to the homeowner to provide clear evidence of "hardship" supported by a detailed financial statement in order to position themselves to obtain a successful modification.  


Here's what the banks are looking for in your "hardship" letter when attempting loan modification.  


1- Explain what changes or events have occurred since your loan originated that have caused you as the homeowner to fall behind. (***very important note *** if you are making your payments, the servicer does not view this as a hardship... )


2- Explain how these changes impair your ability to afford your mortgage payments.


3- Explain when the changes and/or events occur.


4- Explain if you foresee your financial situation improving in the future.  If you state "yes", there is a strong likelihood that your mortgage servicer will ask what you are able to contribute towards your loan...


Any statement you make in your hardship letter must be supported in detail on your financial worksheet.  It is critical that the financial worksheet is completed with 'accurate' detail.  Accurate in this case, an honest and truthful detail because the mortgage servicer will definitely verify every accounting detail you've documented on your financial worksheet.  


Should the mortgage servicer offer a loan modification after these filings have taken place, it is imperative that the borrower (homeowner) understands 100% what the new loan terms are.  I've seen many modification packages that offer extremely attractive interest only packages for SHORT term and when the interest only portion expires, the payments adjust to nearly triple that of the original offer. . .This is a small bandaid and a very LARGE wound!!!  Be careful....


As I mentioned earlier in this article, many of these homeowners who cannot afford to stay in their homes or cannot live without a loan modification or even with the modification with unacceptable terms choose the short sale option.  This means that we work with the homeowner to sell their home for less than what is owed on the property.  With California's new short sale law, Senate Bill 458,  Prohibits Recourse and Anti Deficiency On Second Mortgages, the short sale option is a more common option than foreclosure to distressed homeowners these days.