4 – Loan Modification – California

Loan Modifications are becoming more and more common in California due to the severe real estate recession, rising unemployment, and political pressure being applied to mortgage banks to seek loan workouts instead of foreclosure.  We are often asked what are the basic guidelines that mortgage banks look at in order to determine if a homeowner should be granted a Loan Modification.

There are three basic criteria that mortgage banks use, which are;  a valid hardship, financial  duress which has caused, or soon to cause delinquency on the mortgage payments, and a debt to income ratio within certain guidelines.  This article will focus on the 3rd criteria of debt to income ratio guidelines.

Although the actual debt to income ratio criteria will vary from one bank to another, most all banks view this important ratio in a similar fashion.  First of all, the definition.  Mortgage Banks want to know a homeowners total debt which includes; mortgage payment (whether being paid or not), property taxes, insurance, utilities, telephone, groceries, auto payments, auto gas, eating out, entertainment, clothes, child support, education, etc.  The income is simply the total family income after taxes if you are W-2 employed. The debt to Income (DTI) ratio is simply the total debt divided by the total family income.  Most mortgage banks want this ratio to be between 60% to 95%, prior to the loan modification being granted.

The logic of this ratio is as follows.  If a homeowners DTI is higher then 95%, then from the Banks point of view, even a loan modification is granted, there is a high probability that the modification will not be enough to prevent the homeowner from being delinquent in the near or mid term future, in most cases.  So they will usually decline a Loan Modification request if this ratio is to low, and suggest a Short Sale instead.  On the other hand, if a California homeowners debt to income ratio is lower then 65% or so, then the Bank has an entirely different point of view, which is “Why is the homeowner asking for a Loan Modification in the first place ?”  From the Banks perspective, if there DTI ratio is this low, the homeowner  should be able to keep up with their loan payments without a Loan Modification.

There is another ratio that the mortgage banks look to achieve after a loan modification is completed.  Most mortgage banks would like to see the homeowners Mortgage Debt to Income ratio be about 38% after the loan modification is completed.  Note, this the just the mortgage debt, not the homeowners entire debt as defined above.  This final ratio assures the mortgage Banks that there is a high probability that the homeowner will be able to keep up with the mortgage payments under the current financial duress, and thus prevent future foreclosure.  For questions, visit our loan modification affiliates website, Ca Loan Mod Lawyer, or call them at: 1-888-530-1212.

NPR Radio reported today that only 2 out of 10 Loan Modifications are being issued in California to homeowners who directly contact their Mortgage Bank.  While some expert Loan Modification companies in California are achieving success rates as high as 90% plus.   With all of the buzz and political pressure on banks to forestall foreclosure and conduct Loan Modifications, one would expect the homeowner unassisted success rate to be much higher then this.  There are several reasons why many California homeowners are being denied Loan Modifications as explained below.

One, many homeowners do not realize that nearly all Mortgage Banks have basic income qualification parameters.  A home owner cannot make to little compared to their total living expenses, for the Mortgage Bank assumes that there is no a severe enough  hardship that is negatively affecting the borrowers income in order to justify the Loan Mod.  On the other hand, the homeowners income can’t be too low, for the Mortgage Bank will assume that even after a Loan Modification is successfully completed, there is still a high chance that the borrower will default on the loan in the near future, and therefore is not worth the effort of a short sale.

Second reason why borrowers fail to obtain a Loan mod, is that the Loan Modification package is not correctly completed.  Mortgage Banks today are being bombarded with both loan Modification and Short Sale applications, and do not have time to process incomplete or incorrect applications.  So these packages are simply tossed out and the homeowner is required to start over again, often times without any feedback as to what was wrong with the previous application.

Third reason that many Loan Modifications in California are rejected by the Banks, is the current loan program and interest rate is not onerous enough.   This is often a vague criteria, for it depends on the bank, loan amounts, area within California, political pressure, and other factors.  So many borrowers contact their lender, spend many hours preparing the Loan Mod package, and then weeks of calling, waiting, FAXing, only to find out that the Mortgage Bank denied their package because the current loan terms and rates are  determined to be “good enough”

Fourth reason causing Loan Mod denials in California, is a poorly written hardship letter.  Many times the Mortgage Bank will place much emphasis on this document, which can make a break the deal, or highly determine how much of an loan improvement the borrower will achieve.

An expert Loan Modification company can help the homeowner seeking a Loan modification avoid many of these pitfalls.  Our team of professionals at CaLoanModAttorney.com have a Loan mod success rate of over 92%.  Our Customer Consultants work with the homeowner at the beginning of the process to access the probability of a successful Loan Mod, and gathering the required documentation, packaging the documents, and consult with the borrower in the writing of the hardship letter.  Our processing department then begins the laborious task of submitting the package, numerous phone call follow-ups, supply additional information if requested, until the Loan Mod request reaches the final decision stages.  Our staff of 5 attorney’s is supervising this process along the way.  They step in during the Mortgage Bank analysis process to impact the negotiations in order to obtain the most favorable terms for the borrower.  This is another great advantage of using a professional Loan Modification company such as ours versus a homeowner trying to do it on their own.  For the 20% of the  homeowners who go it alone who obtain a Loan Modification, they usually don’t get the best possible terms available.  The Mortgage Bank negotiator on the other end of the phone is usually paid a small bonus based upon their results, and are fighting on behalf of the Mortgage Bank.

If you have any questions about Loan Modifications in California, please feel free to contact us at:  888-530-1212, or drop us an email at:   Info@CaLoanModLawyer.com

Today, CitiMortgage announced a new loan modification plan that will benefit many California homeowners who are in need.  This new plan will reach out to about 500,000 homeowners who have loans with the bank.  Citibank expects that about 135,000 will qualify for the new loan mod program, resulting in about $20 billion in loan workouts.. The unique aspect of this plan, is that CitiGroup is going to look at modifying loans for homeowners who are not delinquent on the loan payments.  Heretofore, most banks would not seriously consider a loan modification unless the borrower has missed at least one mortgage payment.  The goal of the program will be attempt to modify the loan terms for homeowners who have a hardship.  This will be accomplished by either extending the mortgage term, or reducing the interest rate so that the homeowners total mortgage debt is about 38% of the income.

Another unique feature of the new Citibank loan mod program, is that it will not focus on whether the borrower has a risky negative amortization loan, or adjustable rate mortgage.  But will look at whether the borrower may be at risk of falling behind on their loan payments because they live in an area with high unemployment or declining home prices.   The other important part of this new program, is that Citigroup will also continue to extend their foreclose moratorium practice in California and other states.

For more information about Loan Modifications in California, or to learn how a professional Loan Mod company that is Attorney based can increase your chances of  acquiring a successful Loan Modification, please drop an email to our Loan Modification affiliate at:  Info@CaLoanModLawyer.com

Good news for California homeowners who may be having trouble keeping up with their home loan payments. JP Morgan announced this past Friday that they are going to greatly increase their Loan Modification programs, and are also going to put a 90 day moratorium on Foreclosures.  This expanded Loan Mod plan is earmarked for approximately $70 Billion in mortgage loans, which could help approximately 400,000 homeowners avoid foreclosure.  Since 2007, JP Morgan already has completed negotiating Loan Modifications on about $40 Billion in loans for about 250,000 homeowners.

This a great news for California homeowners who may have recently experienced an adjustable rate reset, or had a financial hardship. The Loan Mod program will also apply to homeowners with mortgage loans with Washington Mutual and EMC.  JP Morgan acquired Bear Sterns companies which EMC was a part of, and WAMU was acquired by JP Morgan in September.

Bank of America has also stated that it is starting a new program this December 1st, to conduct about 400,000 loan modifications that were loans with the newly acquired Countrywide Mortgage. In August, the FDIC also increased their Loan Modifications plans after they took over Indy Mac Bank.

These loan modifications will possibly include rate reductions, extending terms, moratorium on payments, and in some cases totally replacing the loan with a new loan. California  homeowners who are having difficulties making their mortgage loan payments and have a hardship, should consider a Loan Modification.   A professional Loan Modification company that is Attorney backed, or better yet, Attorney lead, can negotiate more favorable terms and conditions in most cases.  Also, these Loan Mods companies can save homeowners many hours of frustrating work.  For more information regarding Loan Mods or for questions, visit the website of our Loan Modification Affiliate:  CaLoanModLawyer.com

Loan modifications are only truly relevant in the real estate world when property values have dramatically declined, similar to what has happened recently in Orange County, CA.  Since the Orange County real estate economy has been rising since 1997, most people here have had no need to learn about loan modifications.  Therefore, when a homeowners mortgage needs to be addressed for any reason, refinance is the initial thought.  Refinancing is advisable in a stable or increasing market.  It gives homeowners the ability to take cash out when needed, lower their interest rate, fix their interest rate, as well as other options.

In today’s declining market in Orange County, refinancing is available to only a select few. Getting approved for a traditional refinance is extremely difficult.  This is due to Wall Street is no longer purchasing loans from originating banks, lenders have cut programs to less qualified borrowers, and loan to value ratios have substantially increased in Orange County and elsewhere.  If the government is not guaranteeing buying loans then most brokers and lenders will not release their funds. Fannie Mae, Freddie Mac and FHA are the Government Sponsored Enterprises (GSE’s) who are supposed to come to the rescue but are unable to do so in the recent financial crisis that hit Orange County and the rest of California.

Potential Orange County homeowners or current homeowners looking to get financing must now have superb credit , lots of equity in the home (or larger down payments), provable job security, disposable income after the bills are paid and proof of the ability to repay a large mortgage. If any of these conditions these conditions are not met, getting a refinance (or new) loan is almost impossible.  When considering refinancing in a market where equity has evaporated, causing loan balances to exceed property value, there is not option to refinance.  That is when  Loan Modification comes into play.

A Loan Modification is a negotiation with your current mortgage lender(s), in an effort to possibly reduce the loan payments, interest rate, or even the loan balance. A loan modification should be employed if the equity in the home is less then 5%, and the homeowner has had a recent financial difficulty, which in today’s market applies to about 70% of the populace due to the recent word financial crisis.

In today’s declining market, refinancing is available to only a select few, while a Loan Modification is more readily available to the masses of homeowners.  For more information about Loan Modifications, please visit our Attorney based Loan Modification affiliate at:  www.CaLoanModLawyer.com … or drop them an email at: Info@CaLoanModLawyer.com

A Loan Modification (sometimes called a Loan Mod), is the altering of one or more of the characteristics of a loan and/or its terms.. Loan Mods are usually the result of the borrowers inability to make payments in the agreed upon time-frame or because the property is worth less than the borrower owes. This means that a Orange County homeowner has taken out a loan to purchase a property, or refinanced a cash out loan,$ and in not able to repay it in accordance to the pre-set schedule designed when the loan was taken out. They then fall behind on their payments and are faced with a few tough choices…. foreclosure, deed in lieu of title, short sale or loan modification.  The only option of this list that does not force the Orange County homeowner to lose their home is the Loan Modification.

For homeowners who can document the ability to repay the loan in a reasonable and sustained capacity, the bank will allow certain changes to be made in the loan. These loan modification changes include temporary interest rate reduction, permanent interest rate reduction, adding an interest only option, stretching of amortization, principal balance reduction, a forbearance agreement or a combination of changes.

A loan mod is a negotiation between the homeowner and the bank.  The goal of a loan modification is to change the amount of payment to a level where the borrower can consistently make their mortgage payment as well as pay other bills. Banks do not want a mortgage to consume an entire monthly budget. They will take the homeowners entire budget into consideration ie; car payments, cell phone, utilities, credit cards payments, etc.  Keep in mind that bank’s loss mitigation department will take into account all necessary expenses to live a normal while still maintaining a reasonable mortgage payment.

Our professional real estate company specializes in loan modifications for Orange County homeowners.  We have association with an Attorney who has worked the some of the Nations largest banks.  For questions or consultation regarding a potential loan modification, call our Attorney based Loan Modification affiliate:  949-388-3396 or email us at:  Info@CaLoanModLawyer.com