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Loan Modification vs FHA Hope for Homeowners Program. Comparative Analysis!

Loan Modification vs FHA Hope for Homeowners Program. Comparative Analysis!

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Published by Steve Linnin
Compare the new FHA - Hope for Homeowners Program to a mortgage loan modification, if your are in foreclosure, close to foredlosure or have a high interest rate sub-prime style loan, you have several options. Start a loan workout with a loss mitigation department or complete a mortgage loan with FHA.
Compare the new FHA - Hope for Homeowners Program to a mortgage loan modification, if your are in foreclosure, close to foredlosure or have a high interest rate sub-prime style loan, you have several options. Start a loan workout with a loss mitigation department or complete a mortgage loan with FHA.

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Published by: Steve Linnin on Sep 02, 2008
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08/11/2011

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Loan Modification vs. FHA Hope for Homeowners Program Comparative Analysis!
 
Loan Modification vs. FHA – Hope for Homeowners Program:Current Housing Market Status:
In the last 3 or 4 years, a large number of homeowners have been trying tocomplete a “loan workout” with their current mortgage lender to lower the interestrate and improve the terms of their loan. Many lenders have chosen not toaccept any new terms, rather, let the property go into foreclosure.Because lenders have an overwhelming number of properties in foreclosure, theyare starting to accept loan modifications via their loss mitigation departments.The time is ripe for consumers (who own homes) to take action and request thattheir loans be modified towards better terms and a lower interest rate they canafford, if they have high interest rate sub-prime loans or are at risk forforeclosure.Since, the rate of foreclosures is increasing, everyday, the federal government,congress and the president have approved and signed a new bill which will allowhomeowners to take advantage of a new “FHA – Hope for HomeownersProgram” designed to save more than 400,000 homeowners from foreclosure.This program will go “live” on October 1
st
, 2008.The new FHA loan program will assist homeowners who are currently inforeclosure, close to foreclosure or those who have high interest rate mortgageloans like those called sub-prime loans. The program is different than a loanmodification in several ways.The following is a bulleted layout of the deference’s between completing a loanmodification and getting approved to do a FHA –Hope for Homeowners program.
Loan Modification:
1. You can recast your current loan into different terms, with the hope tobenefit from a lower interest rate, which is fixed rather than an adjustableinterest rate.2. The costs of the loan modification are rolled on the “back-end” of the loan,which will increase the amount of money you owe.3. The loss mitigation department may choose to keep the amount (that youown on your loan) higher than your current home value. Or they maychoose to lower that amount, some, but not as much as it could be tomake your new payment comfortable in the long term. This could meanthat you may be in financial jeopardy, in the future.4. It’s a fact, what cause your current lender to be interested in keeping yourloan on their books are the servicing rights. They make money servicingyour loan over the term of the amortization schedule. The problem is that
Part of the Foreclosure Prevention Act of 2008
 
Loan Modification vs. FHA Hope for Homeowners Program Comparative Analysis!
 
many lenders have filed for bankruptcy or just got out of the business (dueto poor credits markets) and the servicing rights have been sold to otherinvestors. This often causes a strain, since; the servicer does not actuallyhave your loan documents at their facility, so they rely on others to getyour original loan information to them for review. This process can causethe loan modification workout to be slow, in many cases. Timing is veryimportant, since, homeowners are not knowledgeable in the process andthey often wait to late to get the loan modification process started. It isimportant to communicate with your current lender and get the loanmodification process stated, months before your home goes to foreclosuresale.5. If your request for a loan modification is rejected, you may want to try itagain in a few months, since; some lenders don’t document the loanmodification attempt you made. They are often motivated by changes inthe housing market and their intent changes as more and more loans gointo default. It does not hurt to try again. It is smart to work with a loanmodification specialist, a seasoned loan officer or an attorney whospecializes in real estate, mortgage lending and loan modifications. Theyunderstand how to speak to loss mitigation department, personnel andcan get a general idea of the mood and trends of your lenders lossmitigation department.6. Many loan modification specialist work together with attorney firms to getthe loss mitigation departments to act in a timely manner. Those sameattorney firms work with the loan modification specialist to make sure theoriginal loan documents are not fraud ridden. This is a good approach, yetit can cost the homeowner additional money, since both the loanmodification specialist and the attorney need to be paid for their services.7. Homeowners are required to pay the loan modification specialists andattorneys for the services, provided. Many homeowners think that the costwill be included in the new loan amount, but this is not the case. Logically,lenders are already loosing money when they agree to modify the loanterms and conditions for the homeowner, so, you can bet that they will notagree to “package” the costs of doing the loan modification into the newloan. That cost is paid by the homeowner, directly to the loan modificationspecialist and/or the attorney. The cost can range between $995.00 and$, 5000.00; as an average. Many loan modification specialist, senior loanofficers and attorney firms can work out a payment plan, yet, many requireat least ½ upfront before they start the loan workout. Understand, there isno guarantee that your loan modification or loan workout will be accepted.You will still have to pay your representation your agreed amount. A largepercentage of loan modifications and workouts are accepted. So, it’s agood bet, since, most people do not want to loose their homes toforeclosure.8. Loss mitigation representatives, (most often) do not require you to pay fora new appraisal. Instead, they have your representative provide census
Part of the Foreclosure Prevention Act of 2008
 
Loan Modification vs. FHA Hope for Homeowners Program Comparative Analysis!
 
track data, a BPO (broker price opinion) or a print out of valuation fromtitle company market sales data.9. If you are in foreclosure and costs have been incurred from posting yourforeclosure sales data, attorney fees, title costs or other costs; you couldbe liable for those costs, if our current lender requires it (as a requirementto the loan modification).10. Loss mitigation departments may choose to approve you for a new loanwhich is (another adjustable or tiered –fixed loan). Be careful. Do yourhomework or “talk-it-over” with your representation.
FHA- Hope for Homeowners Program:
1. The federal housing administration (FHA) has required that allhomeowners who become approved for this program accept a 30 yearfixed rate program. No other loan types will be accepted. You can onlyqualify for this program.2. FHA will loan up to 90% of the current value of your property. This meansthat if you purchased your property for a higher purchase price andcurrently have a loan amount higher than what the value of the property ispresently, you can become approved to do a loan amount at 90% of whatyour current house is worth.3. If you have more than a 1
st
trust deed lien (subordinate liens) on yourproperty and your property value has severely, diminished; your currentlenders may take the loss when you get approved under the “Hope forHomeowners Program”. Usually, the subordinate lenders loose, unlessthey purchase the primary lien. Most do not purchase the 1
st
trust deedlien. So, the subordinate lender takes a loose on their investment.4. FHA’s goal is to keep as many homeowners in their homes. Theyunderstand that it would be better to do a loan for a homeowner ratherthan have that property go into foreclosure, be place into the retail realestate marketplace, causing a further degrading of the housing market.5. The FHA underwriting guidelines are currently more liberal than any otherloan guidelines in the current market. FHA is more forgiving in theirapproach to mortgage lending.6. The FHA underwriting guidelines have not been disclosed. As October,1
st
, 2008 approaches, lenders, processors and underwriters will have amore clear idea as to what is required to get a loan approval.7. Homeowners will (probably) be required to pay for a new FHA appraisal,as a condition for loan approval and closing. Underwriting guidelines willdetermine if this is true. The average costs for an FHA appraisal isranges, $300 - $450.8. Income to debt ratios will be determined and posted in the underwritingguidelines. Consult your loan modification specialist or loan officer.9. The loan servicing companies that service, sub-prime loans will (probably)be more inclined to accept a loan modification, since they will want totransfer the lien to FHA, rather than keep it on their books. They have
Part of the Foreclosure Prevention Act of 2008

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