The number of mortgage servicers under contract to perform government-sanctioned loan modifications has grown to 38. According to the administration, 85 percent of the nation’s mortgages are now covered under its Making Home Affordable Program (HAMP). DSNews.com
So now that only 15% of the servicers aren’t part of the program, you’d think we should start seeing some movement…but I wouldn’t hold my breath.
If you’re dealing with your servicer right now, I’d bet my next paycheck you’re frustrated with how long it’s taking and you don’t understand how a servicer can say your loan can’t be modified even though there’s a government program that says it can.
It has mostly to do with the investors and the government not being able to tell private investors or public companies what to do. But it also has something to do with servicers being overwhelmed. Not to mention way too many people without true hardships trying to get the deal of a lifetime (which they’ll never get) clogging up the pipeline for those that truly need the help.
Oh…and don’t forget the people that continually refile their paperwork because they’re sure this time it will be approved even though nothing has changed since the last time it was denied.
I don’t mean to be callous or insensitive. I know it’s your family’s home you’re fighting for. I know that being persistent is the only way you’ll ever have success with your servicer.
All I’m saying is that everyone reading this article needs to stop and re-assess their situation.
Use realistic numbers to figure out:
- How much you make and
- How much you can afford to pay every month for housing after your ‘must pay’ bills
And then see if that payment can support a mortgage on a home worth what you owe on your home. For example:
If you owe $100,000 on your home, you need at least $537/month to make a mortgage payment at 5% interest. And that’s without taxes and insurance, which MUST be escrowed with Home Affordable modifications.
A $200,000 home takes $1074/month.
Use a mortgage calculator like the ones at DinkyTown to figure how much you need for your mortgage.
If you’re astute, I’m sure you’re wondering why I say figure your payment based on how much you owe rather than how much your home is worth. If that’s what you’re thinking, good for you…you’re using your head.
The only problem is…you’re not going to get a principal reduction with a Home Affordable modification. While it is allowed in the program, it’s not being used…the investor would generally rather take the loss, foreclose, and take their chances at a foreclosure sale.
It’s sad, but true…
Try different interest rates, though, because the President’s program can go all the way down to 2%.
But if you don’t have enough income to pay a realistic house payment and your daily living expenses, you can’t afford your home and you’re simply postponing the inevitable if you continue to apply for a modification.
Maybe that’s your goal…extend the time in your home at all costs. If so, then I guess that’s OK as long as you realize you may be taking up space in the system from someone that does qualify.
But if you’re just applying because the program exists and you don’t really have a plan, please stop and consider the best course of action for you and your family.
Is it possible that if you used the same time, energy, and money devising a plan to move out of your current home and into another one, you actually feel better about your situation?
Sound weird, doesn’t it?
But here’s why I say that…right now, all of your hopes are wrapped up in something you have little to no control over—your lender and the investor on your loan.
If you start planning your way out of the situation, you take control back and will start creating hope even in the worst of situations. By focusing on what you can control, you and your family can move forward even if it means leaving your home and moving into a rental or an apartment.
I don’t know what’s right for you and your family…only you do. Every situation is different (which is another reason the mods are taking so long).
Your plan could include (for example):
- Saving as much as possible for a few months while you try for a Home Affordable mod and possibly choose not to pay your payment if you’re still able to pay it.
- If the mod is turned down, save even more and begin planning your move while your attempt to sell your home (short sale or normal sale).
- If that doesn’t work out, try a deed in lieu or simply let it go to foreclosure.
- Move out and use the money you’ve saved to pay your deposit, first and last month’s rent and moving costs.
That’s simply one way it could work out and obviously isn’t right for everyone or every situation. And my point isn’t to give you a plan for your family…it’s to make you stop and make your own plan.
Tags: budget, Home Affordable Modification, tips
August 6th, 2009 at 6:49 am
Does your house have to have been on the market before the lender will consider a deed in leiu? I ask b/c HSBC has denied my loan mod, and told me that my only other option was short sale or deed in lieu. Why go thru the hassle of trying to sell if they are just going to take the keys back instead? Just wanted your thoughts.
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Todd Temaat Reply:
August 17th, 2009 at 8:22 pm
Thanks for writing. Your house does need to have been on the market before the bank will consider a deed in lieu. Remember the bank is trying to minimize their losses…and you selling the house will be much less costly than taking it back from you and trying to sell it themselves.
Hope it helps and sorry it took so long to respond.
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August 6th, 2009 at 9:46 am
It does not make any sense, by either the servicer or investor, when one is in an upside down mortgage, not in the thousands, but in the hundred thousands, and the investor would rather foreclose!!
Where is the logic??
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August 6th, 2009 at 10:29 am
You note in your article, “Not to mention way too many people without true hardships trying to get the deal of a lifetime (which they’ll never get) clogging up the pipeline for those that truly need the help.”
Perhaps there are many of you that think that just because people can afford their homes that the banks shouldn’t work with them. We were very responsible in purchasing a home that we could afford. However, there were new loan products at that time that were terrible and the predatory lenders did not educate us on the details of the loan. Our home is now worth 50% of our loan amount (we’re upside down in the loan $200,000) therefore, we can’t get out of our loan. Why would we continue to pay on a loan for something that is worth nothing? The loan is so bad that it can fluctuate from month to month and the 1st can go up to over 8% and the 2nd to over 12%. We have asked the mortgage company to simply convert the loan to a 30 year fixed in order to get out of this loan, but they won’t do it. They leave us no choice but to let them forclose. We would be paying on this thing until we retire only to break even with what the home is worth.
So, there are many of us out here that actually can afford our homes, but refuse to be held captive by the mortgage companies and their unwillingness to correct the wrongs of their predatory lending practices.
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Todd Temaat Reply:
August 17th, 2009 at 8:36 pm
So you take no responsibility it at all for accepting the terms of a bad loan?
None? Come on…it’s not solely the bank’s fault. Buyer beware doesn’t apply any more?
I’m NOT saying you weren’t taken advantage of…maybe you were…and I know there were definitely bad loans and predatory loans and people put into different loans than they signed papers for.
But in the most cases, people understood what at least the basics of what they were getting into and accepted the terms because they:
1. Wanted to put the least possible amount down.
2. Wanted the absolute lowest payment possible.
3. Were certain the value of their home would only increase in the near future.
4. Were certain they’d be able to refinance out of a bad loan before the higher interest rates and payments began.
At least I know that’s the situation I was in when I bought my last home…which is why I’m in the middle of a short sale now!
Maybe the best thing to do is walk away…if your lender won’t mod your loan and you refuse to pay the payment you don’t have any other choices.
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August 22nd, 2009 at 9:35 pm
Wow.. It is such a good tips..
I’ve own a house and car.. But I just using auto debit..
I don’t calculated.. Maybe it much safer and easier..
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