I got this e-mail from a site visitor a couple weeks ago and thought I’d post it and our response because I know many site visitors are in similar positions.
I have 2 mortgages. The first is $956K and the second is $200K our house price has fallen allot and we have an ARM, our interest around is in the 7.25% on the first and the second is around 8%… We are not behind yet but will be this month… Please help.
To get an authoritative and up to the minute response, I forwarded the e-mail to Brent Lane from The Lane Group. Brent is a business partner of mine and is my mortgage expert. He works with homeowners in and nearing foreclosure everyday in one of the states that’s been hit the worst with falling prices on expensive homes…California.
His response follows…if you have additional questions, I invite you to contact Brent directly or investigate his sites…he knows his stuff and he will give you the right answer quickly and without beating around the bush.
Tags: Foreclosure, hardship letter, high cost homes, loan modification, refinanceThe solution to your mortgage issue can be relatively simple. If you feel you are going to fall behind in your payments we need to demonstrate the “reason” to you lender. [for help with this, check out Hassle Free Hardship Letters] With balances as high as yours, lenders do not want to take your home, but would rather find an equitable solution to the issue.
The first solution I would have you consider is a short-refinance. To accomplish this we would need your mortgage companies to agree to a payoff to your mortgage at less than what you owe them using our “reason” as our foundation or leverage. A typical transaction would be 90% loan-to-value of current value and would be subject to the current market interest rate.
The second solution is to chase after a note modification. This is simply an adjustment to terms of the mortgage to make the payments more affordable. To qualify for this we would again need that “reason” and would need to present your case accurately to your lenders. If this is done properly we will be able to adjust the terms accordingly. The only negative with this type of transaction would be your balances would remain the same so you would remain upside down with more affordable payments.
It is important to look at each situation and see which approach will benefit you the most moving forward. Interest rates on a Jumbo loan refinance are not as favorable as the rates you could get on a note modification but you have a lower balance. If you have a lower rate you end up with a higher balance. It just comes down to which is the best solution given the circumstances.
Each homeowners’ situation is unique and will require more information to allow me to help you further. I strongly suggest you find help with either a short-refinance or a note modification (link to )because both are difficult to accomplish without the right help.
January 19th, 2010 at 7:04 pm
What is the difference between a “loan modification” and a “short refinance”?
Todd Reply:
January 22nd, 2010 at 11:27 am
A loan modification usually doesn’t modify the amount you actually owe the bank…it just extends your payments or lowers your interest or both. A short refinance is where your lender writes off the difference between what you owe and what the house is worth now and then writes you a new loan for what the home is worth now (or closer to it, anyway).
If you have more questions, please ask.
January 25th, 2010 at 2:56 pm
Short refinance;
Would you have to put money down on the new loan? Percentage?
How does this effect your credit score?
Todd Temaat Reply:
January 27th, 2010 at 12:14 pm
As in most legal and financial matters, the answer is…it depends on the situation. Everyone’s individual situation is different. I’d really recommend talking to a mortgage broker to get answers to your questions. I’d recommend Brent Lane because he knows this stuff inside and out, but any mortgage broker can write these loans…getting them approved is another story…just like a short sale.
Sorry I couldn’t be of more help. Thank you for asking, though.