Florida homeowners are no strangers to the idea of mortgage modification, as put forth via wide-spread publicity efforts announcing home loan modification as part of President Obama’s foreclosure-prevention program. As recently as last week, Chase Mortgage, the servicing side of JP Morgan Chase, had negotiated more than 15,000 modifications under this program. Chase Mortgage isn’t’ the only major bank facilitating mortgage modifications.
Back in April of 2009, Bank of America delivered as many as 100,000 letters to borrowers who could potentially benefit from home loan modification. Although BOA has yet to release information as to how many mortgage modifications it’s performed, the lender is clearly involved in the process.
Making Home Affordable – Key Goals and Intended Outcomes
When the Making Home Affordable plan went into effect on March 4, the Obama administration believed that it could help as many as 4 million people steer clear of mortgage default and/or foreclosure. The plan’s key focus involved encouraging lenders to help past-due borrowers or those at-risk of falling into this category lower their interest rates to levels where their monthly housing payments would not exceed 31 percent of their gross monthly income.
While the Making Home Affordable program isn’t available to all Florida mortgage borrowers, it may very well be an option for you. To find out if this program fits your individual situation, follow these important steps:
Step 1: Go to the Making Home Affordable Website
You can find everything you need to know about the Making Home Affordable program on their official website.
Step 2: Determine Your Eligibility
Once you get to the site, select the option that says “Find out if you are eligible” and then go to the “Home Affordable Modification” option. (Note: If you’re behind on your mortgage, don’t go to the “Refinancing” option – as this is just for those who want to lower their interest rate but are NOT delinquent yet.)
The site makes use of a Five Question Quiz. Go ahead and take it. Taking your answers into consideration, the site will let you know whether you fit the scenario for someone who might qualify for a mortgage modification.
If you qualify for Obama’s Mortgage Modification Program – then you fit the following:
- You bought your house before Jan. 1, 2009
- You owe less than $729,750
- The home is your primary residence
- You are currently delinquent on your mortgage payments
- Your payment equals more than 31% of your monthly gross income
Once your eligibility is determined, the site will provide you with an eight-item checklist of items you’ll need to provide your lenders so that the mortgage modification process can begin.
Step 3: Collect Required Paperwork
Like any mortgage approval process, you’ll be required to submit specific documents to support your application. Documentation typically asked for by lenders offering home loan modification through Making Home Affordable will ask for the following:
- Household-income documentation, such as pay stubs; tax returns; savings account records
- Mortgage statements; second mortgage info, such as home-equity loans statements
- Credit card bills
- Information on other debt, including student and car loans
Something else you will be asked to provide is a written “hardship letter” describing exactly what conditions led you to become delinquent on your home loan. Reasons that may apply to you include job loss, unforeseen medical expenses, or divorce.
Well-Written Hardship Letters Can Make or Break Your Home Loan Modification Application
A well-written hardship is perhaps one of the key determining factors in being granted home loan modification approval. Think of these letters as a means of personalizing your situation. No one applicant’s circumstances are the same, and as in any case where folks are competing for funds – the most compelling situations win. Remember that your financial documentation may prove too cryptic to point out the specifics – the nuances, if you will – that caused your home loan delinquency – this is where your hardship letter can really help.
Something to keep in mind regarding your hardship letter: Rather than writing that you made a bad decision in that you never could have afforded your home loan in the first place, talk about the job loss or health problem you suffered and how it kept you from keeping up with your payments. Explain that things are better now, that you’ve recovered or that you have gained new employment – and that you’re working on getting back on track with your financial obligations.
Failing to explain these specifics may cause your lender to look at your situation as a simple case of financial irresponsibility or carelessness. To guard against this – be sure to tell them the complete story.
Step 4: Follow Up with Your Mortgage Lender
When you complete your home loan modification application packet, be sure to follow up with your mortgage servicer or lender (whoever it is that you send your monthly mortgage payments to). You should be able to continue your mortgage modification program with your lender via phone, mail and email – with no need to meet anyone face to face.
Step 5: Be Prepared to Wait for a Decision
Perhaps one of the hardest things for applicants participating in the Making Home Affordable program to do is to wait for lenders to approve their program. Lenders may choose to lower your mortgage debt by either reducing your interest rate, lengthening the duration of your mortgage, or reducing your overall mortgage balance.
In nearly all cases, your lender will start by shifting your mortgage payment down to match 38 percent of your gross monthly income. After this is accomplished, the government provide compensation to your lender allowing them to reduce your payment down to 31 percent of your gross monthly income.
Once your monthly mortgage payment has been lowered to 31 percent of your gross monthly income, you’ll receive new paperwork which, when signed, will start a new mortgage loan with your lender that reflects the modified terms. The total process can take as many as four to six weeks -so hold tight. Lenders do hope to expedite the home loan modification process, but this will only happen as new staff is added to help speed up the processing time frame.
Remember: You’re On Probation for Three Months!
Something you’ll want to stay mindful of is the fact that your home loan modification arrangement with your lender is granted on a 3 month probationary period – pending your on-time payments for this length of time. Assuming you stay current for this time frame, your mortgage payment arrangement will then become permanent.
Special Note for Florida Mortgage Borrowers Seeking Home Loan Modification
As noted above, mortgage lenders are not required to lower the overall amount due on your Florida home loans. This, I feel, is one of the biggest problems with the Making Home Affordable program. In many cases here in Florida, home owners will not be able to maintain payments if the only modification they receive is the payment amount being lowered to 31 percent of their gross monthly income. So many homes here in Central Florida have dropped to below 50 percent of their initial value that this single modification just won’t cut it. Put simply, it’s very likely that these borrowers will choose to let their homes go into foreclosure or will pursue short sales in an effort to wipe the slate clean.
That said, I do feel that lenders are becoming smarter (or more realistic) as we move further into the current housing situation. More and more bank owned homes and short sales are coming in with lenders paying some or all of buyers’ closing costs – which was not the case early on. As such, lenders may also be more willing to reduce debt loads in addition to lowering payments.
I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
No related posts.
Great Post Kevin – I read a WSJ article that talks about the Obama plan only helping 1 out of 9 people in need. Private industry needs to step up to the plate as well.
http://online.wsj.com/article/SB123617623602129441.html
Chris Brown
Last blog post from Orlando Loan Modification… The HIDDEN URGENCY for Florida FHA mortgage loans.
I agree. Noticed you do some work with the private mortgage modifications, is this correct? Would love to learn more about that! Anything we can do to help more people needs to be done!
The problem is owning a home has become unaffordable to a lot of people. Especially if they have lost their jobs. People have needed to borrow way more than is sustainable to buy a home. If you can’t afford to buy a house I think it’s best to rent. The bank are to blame for a lot of it though.