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Are you a California homeowner in danger of losing your home because of financial difficulties? The federal loan modification programs Making Home Affordable (MHA) and the Home Affordable Modification Program (HAMP) are here to help! Under the programs, homeowners who have loans originating before Jan. 1, 2009 and owe less than $729,750 and who’s loans are backed by either Freddie Mac or Fannie Mae will be eligible for federal government backed loan modifications. Homeowners that are delinquent on their payments or can show that they will soon have difficulty with payments are eligible as well!
After submitting the proper paperwork to file under the federal programs, homeowners will usually be place into a trial loan modification (some homeowners who are not yet behind on their payments may be able to skip this step). A trial loan modification is basically a period where the bank sees if the homeowner will be able to keep up with their new payments. If a borrower misses one of these payments, they are usually disqualified for a loan modification. It is important to realize that being approved for a trial loan modification does not automatically result in permanent modification, even if all the payments are made on time.
Under the federal programs, approved loan modifications will reduce the mortgage payments to 31% of the household’s monthly income. It is also possible that the homeowner may see a reduction in their interest rate, and principle reductions are also possible.
Even if a homeowner does not meet the federal guidelines, it is still possible to get a loan modification. Most banks have their own loan modification programs through their loss mitigation departments, although some of these may be harder to qualify for. In fact, banks are not required to tell borrowers why they have been denied a loan modification, and so some borrowers are left wondering.
Up until now, most banks have been reluctant to approve loan modifications. Whether it is because they are overwhelmed with the workload or simply unwilling to cooperate, less than 50% of trial loan modifications have been approved for permanency. Fortunately, just last week the Federal Treasury issued new loan modification guidelines and regulations it expects banks to adhere to. This includes penalties and possible sanctions if the Fed feels that a bank has been uncooperative with getting people the help they need.
If you have been denied a loan modification after trying to do it yourself, don’t give up! I highly recommend hiring a loan modification attorney to help you through the process! These attorneys have worked with banks extensively and know exactly what it takes to get a loan modification done. They have the manpower and resources to stay on top of tricky bank deadlines and ensure the paperwork is filled out correctly. Many loan modifications have been denied simply because a confused borrower filled out the wrong paperwork or submitted it to the wrong department!
While there have been unfortunate scams stemming from phony modification companies and unethical lawyers, new legislature has been passed in California to help protect homeowners. California Senate Bill 94 stipulates that no one offering loan modification services is allowed to ask for upfront fees of any kind. Fees may only collected as the services are being rendered. In addition to this bill, it is advised that you check with your state’s Bar to make sure an attorney you are working with is in good standing and not under investigation for unethical practices.
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