Your Questions About Loan Modification News
Joseph asks…
How does a short-term loan modification work?
Knowing our ARM readjusts in the fall we tried to refi but there is a $4K difference between how much our home appriased at and how much is left on our loan.
I called my lender who told me good news: our loan can only increase up to 1%. She then said all this other stuff I didn’t understand, 6% margin, 3.171% current interest rate, 9.171 max, 8.075… But, what I understood is that our home loan won’t increase more than $100 in Sept. when it re-adjusts. We can apply for a short term modification that will last 2-5 years (I believe) but can only apply for that 3 times for the life of the loan. $100 isn’t much, but over the course of a year that’s $1,200 in interest. Also, it can adjust every 6 months, so it might go up another $100 next year.
Should I apply for the short-term loan modification, make home improvements this winter (planning on finishing basement ceiling and electrical) and try to refinance in Jan. or just pay the increase, do home improvements, and refi in January?
Joe answers:
Accept the increase. Do your h/i and refi when completed. The interest that is deferred is not going to help you. Also take a harder look at your note. Do you have a prepayment penalty. That PPP if it is there may be why you would be 4k short to close.Once the ppp faze is over you may be able to refi with ease. You just have to order the pay off 1 day after the expiration date. Generally speaking with most dates it is the day you actually signed your note 2 years and 1 day if you have a 2 year fixed and adjustable after that.
I am a mortgage banker in TN & KY
Thomas asks…
How does a loan modification work?
Im having a hard time understanding this, maybe someone can help. Around June of last year we fell behind on our mortgage, our initial mortgage company, Flagstar, put us into a forbearance program which reduced our mortgage by about $300. We were told to not miss any of the payments and just continue making payments until they could find a program we qualify for. So we did. 3 months later they put us into a loan modification program, same thing, keep making the payments they say to make. We continued this waiting for a result but then the loan was sold to Nationstar Mortgage and they started the process all over by putting us on another loan modification program, we were told the same thing, make the payments and dont be late. So we have. But we never hear any results or any new news from Nationstar Mortgage. Its very confusing, we have even asked if we should start making additional payments on top of what they are asking, and they say it does not matter and they would send it back. We had a claim from our insurance company to get a roof done, and Nationstar wont release funds to get the roof done because they say we are 89 days behind on our mortgage. They just kept the check and said it will go into an escrow. We are just so confused, it really feels like they are just waiting for the right time to say get out your being foreclosed on. We cant get any information from them when we call, different stories from each person we talk to. We cant even speak to the same person, we have called back a few times within minutes and get lied too saying “Oh, Im the only one in the office right now” Its extremely frustrating now knowing whats going on. Are there any websites to get information on this or can anyone help with their experiences?
Joe answers:
Unfortunately you are not alone in this kind of hanky panky. Just look at it like rent and start setting money aside for the rainy day that will come sooner or later. Since you have tried to work things out in good faith and they have not responded then don’t try to figure it out any more. The people in the banks are incompetent, the person you may speak to has no authority to do anything, nobody knows what is going on and there is nothing you can do at this time.
Eventually you will receive a letter telling you that the loan modification arrangement is for x number of months or years at a certain percentage rate of interest. At the end of those years it will go to a higher amount for x number of years. If you sell the property or if you pay until the end of the loan another additional lump sum amount will be due to pay back the uncollected interest.
Hope this makes some sense and isn’t too discouraging. You will get to stay in the house as long as you make payments.
Robert asks…
Would we default on our home modification loan if we rented the house out?
Here is the long story short. My wife and I are divorcing. The house, which she owned before we met, has always been under her name and we never changed that. She intends to move back to her family and I am staying in the house with my kids and intend to make the monthly mortgage payment. However, we got some news from our insurance agent that concerns us. he said that since I am not on the title I would be considered a renter. I am ok with that. BUT…they would also need to let Bank of America know that the house went from a home owners policy to a rental insurance policy. Our biggest concern is that my wife went through the home loan modification process last year and got our monthly mortgage payment reduced. If we go to them to let them know what is happening is it possible they might say she is defaulting on the loan by using it as a rental property. Clearly I am going to be a “renter” by name but I suspect BoA really won’t care as long as the mortgage and insurance is paid. So my question is…how likely will it be that BoA has an issue once they receive notice from our insurance company about the change into a rental property insurance policy?
Joe answers:
It totally depends on paperwork signed. She needs to call BOA. Just because a home is originally owner occupied does not mean she can’t rent it out. But the terms of the modification may say she can’t.
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