Take Another Look At A Loan Workout – It May Be Another Option
Homeowners that were not approved for loan workout previously might want to give it another look. They might have been denied last year, but under the new guidelines, it’s a whole new world.
Many of the mortgage companies are re-evaluating loan modification company applicants that were turned down previously but may be considered viable borrowers under the new guidelines. Part of the motivation for the lenders willingness to grant a chance to applicants for mods could be the incentives paid to them over time of up to three to five years for successful payment reductions. Lenders can receive incentive payments just for trying to implement loan modifications so it’s no surprise that they are taking a more flexible stance. With more government funds directed at reducing a borrower’s loan to income ratio to a maximum of thirty one percent, loan servicers are becoming increasingly comfortable with executing loan modifications with homeowners that were considered as high risks nine months ago.
The typical procedure for the second try payment reductions sets up a trial period for the borrower while the loan workouts is being evaluated. During the trial period the mortgage payment can be reduced from $500 to over $1,000 per month, but there is zero tolerance for late payments and other infractions. In fact, during the trial there are no grace periods for late payments at all. They need to ask what the due date is and the exact amount, with the cents.
If a payment during the trial period is received even one day late the borrower will be disqualified from the trial period and be deemed ineligible for the government sponsored loan program. This would be considered a second strike on the borrower, making any successful attempts to modify in the future very doubtful. A returned check will result in the same actions so borrowers are encouraged to send certified funds or make payments by wire transfer or Western Union.
Once the trial period is completed, the borrower can enter a loan modifications process following the guidelines set forth in the Making Home Affordable plan. Depending on the specific conditions facing the borrower, interest rates can be reset to as low as 2%, missed payments can be pushed back to the end of the loan, and there is a possibility that some of the principle on the loan balance can be reduced.
The second chance that the Making Home Affordable plan provides could be the difference between borrowers staying in their homes instead of losing them to foreclosure or filing bankruptcy. While the restrictions are tight, borrowers with the discipline to stay on track through the trial can get a modification which will save thousands of dollars and make their mortgage affordable again.
Don’t be fooled by the loan servicers on these second chance programs as they are a last resort and should not be taken lightly as the trail period does not guarantee a payment reductions at the end. I say “buyers beware” on this program. Do everything you can by hiring an experience professional to get a mortgage workouts first before ever entering into this program.
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