qualifying for loan modification

Anonymous · ‎12-10-2008

Please educate me as to whether you believe I may qualify for a loan modification. Here are the numbers:

Total Monthly mortage payment on a triplex (we live in one of the units) - $4400.00 and ($1200.00 additional in 2017).

Credit card debt - $1200.00 per month on $60,000 debt at avg 8%

Income:

$3125.00 rents per month (75% is $2343, the standard formula for rental income?)

$7.000.00 per month gross income as full time teacher.

I just received a call from a fellow who charges $995 up front to package and submit the request for loan modification. If I agree and want to pursue further, there is additional $3,000.00 charge. He indicated to me the loan modifys are using the FHA guidelines of 31% debt to income ratio and mine is around 47%.

Should I pursue this? I am not late on any payments and my middle fico score is 715. I did phone my mortgage company (Homecomings) and they indicated I need to be 30 days late for them to look at a modify. I am going to avoid that at all costs. Thanks so much for any input.

Lel · ‎12-10-2008

First things first, be aware that there are a lot of loan modification scams out there. They prey on distressed homeowners and don't necessarily produce results.

Second, you don't need to work with a third party to negotiate a loan modification. You can do it on your own, but it could take a lot of effort on your part. Most lenders will not consider loan modification unless the borrower is actually late, but this is not a hard and fast rule. If you're current, however, it will be harder to get someone to consider your case.

With regard to your situation, it sounds like that you have a loan that doesn't reset for another 9 years? What are the exact details of this loan - interest rate, caps/limits on the adjustment? Fully amortized or interest-only?

Do you have equity in this property? If you have sufficient equity, then a conventional refinance would be a possibility.

If you're not in distress at present, then don't throw money at the loan modification company. From what I infer, you've got plenty of time to let the credit mess sort itself out.

Anonymous · ‎12-10-2008

I am a housing counselor for a non-profit agency working through the Hope Now Alliance.

I get calls from people all the time who have just paid some con artist to try to get them a loan mod. Don't do it.

You don't actually have to be late on your mortgage to be a candidate for a loan mod. There are a lot of things that factor into it, including your entire picture.

The scary ones are the people who think that if they fall behind they might qualify for something. That's a risky and potentially very expensive gamble that could cost them their homes.

Go to HUD.gov and search "housing counselors." It's free.

Good luck.

Anonymous · ‎12-10-2008

Thank you very much for your reply.

My situation may be OK.

My first mortgage is 565,000.00 fixed at 6.65% for 30 years. It is interest only for 10 years (to march 2017), then principal and interest are an additonal $1200.00 per month. My second is $75,000.00 at 8% interest and baloons in 2021. I was able to refinance to this loan after being in an alt a loan.

As you see, my total mort is 640,000.00 The triplex appraised at 750,000 when i first got my loans. Now I do not know its worth but i would guess about 1/2 that or somewhere in the range of 400,000.00. That is a bit scary but maybe prices will come back before march 2017.

what do you think? After yours and another person's advice, I will not go thru the person asking for a thousand dollars up front to try a modification. I did call my lender and they won't look at anything unless I am 30 days late.

Thanks again.

Stephen

Lel · ‎12-10-2008

@Anonymous wrote:
Thank you very much for your reply.
My situation may be OK.
My first mortgage is 565,000.00 fixed at 6.65% for 30 years. It is interest only for 10 years (to march 2017), then principal and interest are an additonal $1200.00 per month. My second is $75,000.00 at 8% interest and baloons in 2021. I was able to refinance to this loan after being in an alt a loan.

As you see, my total mort is 640,000.00 The triplex appraised at 750,000 when i first got my loans. Now I do not know its worth but i would guess about 1/2 that or somewhere in the range of 400,000.00. That is a bit scary but maybe prices will come back before march 2017.

what do you think? After yours and another person's advice, I will not go thru the person asking for a thousand dollars up front to try a modification. I did call my lender and they won't look at anything unless I am 30 days late.

Thanks again.
Stephen

Even with 9 years to go before the loan becomes fully amortized, it might be a stretch for the property value to rise match your total debt. Can't predict the future, of course.

With regard to the 30 day late "rule", I was told the same thing the first 4 or 5 times that I called my lender to inquire about modification. But I was persistent, wrote a couple letters, and within two weeks after starting my mod quest I received a call from the lender saying that they would consider the modification.

My situation differs from yours, however, because my ARM is due to reset a lot sooner than yours (though still a couple years away). I couldn't refinance because my LTV was too high (but not upside down yet).

I would say give it a try. But stop calling the regular number to inquire - the agents on the other end of the line can only tell you what they're told to say. Try to locate the email address and fax numbers of mid-level and high level executives at your lender. Write a thoughtful letter explaining your motivation for pursuing a modification. Your efforts may still go for naught, but at least you gave it a try.

Anonymous · ‎12-11-2008

Once again, thank you. I have one question. If a lender does agree to modify a loan, does it affect credit score? Is it reported at all to credit bureaus, or affect one's ability to qualify for another mortgage down the line?

Lel · ‎12-11-2008

@Anonymous wrote:
Once again, thank you. I have one question. If a lender does agree to modify a loan, does it affect credit score? Is it reported at all to credit bureaus, or affect one's ability to qualify for another mortgage down the line?

At least one person here has reported that after modification, nothing adverse happened to his credit score. I'm hoping for the same result. I was not late on any payment when I started the modification process, and currently there is a credit reporting freeze on my account. I was instructed not to make any payments during the modification process, but these "lates" are not being reported to the CRAs. My SW FICO has not budged since I started all this.

Based on the preliminary paperwork I have received, I am not going to be getting a new loan - that is, I will have the same account number after the modification. So, there should be no new accounts on my credit report if this goes through. The balance will be a little higher, because my lender is adding two months of "missed payments" to the principal.

In the end, however, I would be content to take a hit on my credit score in exchange for a dramatically lower interest rate (for the first 5 years of the modification) and a monthly payment that is hundreds less than what I pay now.

Anonymous · ‎12-12-2008

A loan modification in and of itself shouldn't affect your credit, but a write-down in principal balance would. It would show as a settlement.