Can You Qualify For A Loan Modification?

Three families have joined a class action lawsuit against Wells Fargo and Bank of America saying the lenders failed to provide promised payment modifications.

Even though they submitted all required documentation they haven’t received long-term arrangements.  ”When a large financial institution promises to modify an eligible loan to prevent foreclosure, homeowners who live up to their end of the bargain expects that promise to be kept.”  Sounds pretty simple doesn’t it?

It seems that even though some homeowners that have met the requirements for the program are in the end being rejected.  Home owners that have been granted a modification that reduces their payments have made payments for the 3 month trial period, as it requires in the Home Affordable Modification Program (HAMP), but they claim that a foreclosure has proceeded or they have been turned down for long-term plans.

Two cases filed in Massachusetts say homeowners are ”living in limbo” and spending scarce resources on payments that might ultimately not save their homes.

Neither Bank of America nor Wells Fargo has commented as they say they have not been served the lawsuit yet.  Ohio lawsuits with different complaints related to the HAMP say that homeowners were promised modifications at a federally sponsored event last year and as of yet they had not received any documents to use to apply for the program.  Another complaint was that the borrowers continued to receive foreclosure notices. The guidelines state:

”Any foreclosure action will be temporarily suspended during the trial

period, or while borrowers are considered for alternative foreclosure

prevention options.  In the event that the Home Affordable Modification

or alternative foreclosure prevention options fail, the foreclosure action

may be resumed.”

As usual federal guidelines are somewhat cumbersome. Qualifications are fairly clear and are as follows: (from http://makinghomeaffordable.gov/modification_eligibility.html)

Qualification Terms:

• The home must be an owner occupied, single family 1-4 unit property

(including condominium, cooperative, and manufactured home

affixed to a foundation and treated as real property under state law).

• The home must be a primary residence (verified with tax return,

credit report, and other documentation such as a utility bill).

• The home may not be investor-owned.

• The home may not be vacant or condemned.

• Borrowers in bankruptcy are not automatically eliminated from

consideration for a modification.

• Borrowers in active litigation regarding the mortgage loan can qualify

for a modification without waiving their legal rights.

• First lien loans must have an unpaid principal balance (prior to

capitalization of arrearages) equal to or less than:

o 1 Unit: $729,750

o 2 Units: $934,200

o 3 Units: $1,129,250

o 4 Units: $1,403,400

Income and assets are verified and all applicants are screened for hardship.  If a borrower is determined to be a potential for ”Imminent Default” the servicer must apply the NPV Test.

”This NPV Test will compare the net present value (NPV) of

cash flows expected from a modification to the net present value of cash

flows expected in the absence of modification.  If the NPV of the

modification scenario is greater, the NPV result is deemed positive.”

The guidelines go on to say: ” The NPV Test applies to the Standard Waterfall only and does not require

consideration of principal forgiveness.  However, the servicer may

choose to forgive principal if the servicer determines that principal

forgiveness improves the likelihood of loan performance and the value of

modification.  Required parameters for the NPV Test will be published

separately.”

A reduction in principal is up to the lender if they want to really help achieve the Debt-to-Income ratio required for a successful modification.

Guidelines for Interest Rate Cap, Principal Forbearance, incentives for lenders and borrowers and all other details about late fees and costs associated with the process are covered and can be found at: http://makinghomeaffordable.gov/modification_eligibility.html.

Needless to say, this is a complicated process and should be managed by a professional unless you have the endurance and patience to apply yourself. Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan.

A short sale is a viable alternative and will affect your credit score less than a foreclosure. Of course this process requires a lot of the same paperwork and can be daunting at best. The professionals at StopForeclosureShortSaleTeam.com are successful and will work with a homeowner to make the best decisions for each individual.

Do you Qualify for a Loan Modification?

Three families have joined a class action lawsuit against Wells Fargo and Bank of America saying the lenders failed to provide promised payment modifications.

Even though they submitted all required documentation they haven’t received long-term arrangements.  ”When a large financial institution promises to modify an eligible loan to prevent foreclosure, homeowners who live up to their end of the bargain expects that promise to be kept.”  Sounds pretty simple doesn’t it?

It seems that even though some homeowners that have met the requirements for the program are in the end being rejected.  Home owners that have been granted a modification that reduces their payments have made payments for the 3 month trial period, as it requires in the Home Affordable Modification Program (HAMP), but they claim that a foreclosure has proceeded or they have been turned down for long-term plans.

Two cases filed in Massachusetts say homeowners are ”living in limbo” and spending scarce resources on payments that might ultimately not save their homes.

Neither Bank of America nor Wells Fargo has commented as they say they have not been served the lawsuit yet.  Ohio lawsuits with different complaints related to the HAMP say that homeowners were promised modifications at a federally sponsored event last year and as of yet they had not received any documents to use to apply for the program.  Another complaint was that the borrowers continued to receive foreclosure notices. The guidelines state:

”Any foreclosure action will be temporarily suspended during the trial

period, or while borrowers are considered for alternative foreclosure

prevention options.  In the event that the Home Affordable Modification

or alternative foreclosure prevention options fail, the foreclosure action

may be resumed.”

As usual federal guidelines are somewhat cumbersome. Qualifications are fairly clear and are as follows: (from http://makinghomeaffordable.gov/modification_eligibility.html)

Qualification Terms:

• The home must be an owner occupied, single family 1-4 unit property

(including condominium, cooperative, and manufactured home

affixed to a foundation and treated as real property under state law).

• The home must be a primary residence (verified with tax return,

credit report, and other documentation such as a utility bill).

• The home may not be investor-owned.

• The home may not be vacant or condemned.

• Borrowers in bankruptcy are not automatically eliminated from

consideration for a modification.

• Borrowers in active litigation regarding the mortgage loan can qualify

for a modification without waiving their legal rights.

• First lien loans must have an unpaid principal balance (prior to

capitalization of arrearages) equal to or less than:

o 1 Unit: $729,750

o 2 Units: $934,200

o 3 Units: $1,129,250

o 4 Units: $1,403,400

Income and assets are verified and all applicants are screened for hardship.  If a borrower is determined to be a potential for ”Imminent Default” the servicer must apply the NPV Test.

”This NPV Test will compare the net present value (NPV) of

cash flows expected from a modification to the net present value of cash

flows expected in the absence of modification.  If the NPV of the

modification scenario is greater, the NPV result is deemed positive.”

The guidelines go on to say: ” The NPV Test applies to the Standard Waterfall only and does not require

consideration of principal forgiveness.  However, the servicer may

choose to forgive principal if the servicer determines that principal

forgiveness improves the likelihood of loan performance and the value of

modification.  Required parameters for the NPV Test will be published

separately.”

A reduction in principal is up to the lender if they want to really help achieve the Debt-to-Income ratio required for a successful modification.

Guidelines for Interest Rate Cap, Principal Forbearance, incentives for lenders and borrowers and all other details about late fees and costs associated with the process are covered and can be found at: http://makinghomeaffordable.gov/modification_eligibility.html.

Needless to say, this is a complicated process and should be managed by a professional unless you have the endurance and patience to apply yourself. Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan.

A short sale is a viable alternative and will affect your credit score less than a foreclosure. Of course this process requires a lot of the same paperwork and can be daunting at best. The professionals at StopForeclosureShortSaleTeam.com are successful and will work with a homeowner to make the best decisions for each individual.

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