SOME LENDERS OFFER “EARLY WORKOUT” LOAN MODIFICATIONS
HOME LOANS, TIPS FOR SELLERS
January 4th, 2009
I read with interest a recent article in the LA Times reporting Fannie Mae, holder of more than 18 million loans in their portfolio, will allow borrowers in trouble to apply for a loan modification before they miss two or more mortgage payments. Up to this point, borrowers were told they must be behind in their payments 60-90 days prior to applying for a loan modification.
In response to increasing job losses, this policy change will allow thousands of borrowers facing financial difficulties the opportunity to apply for a loan modification before their credit is dinged for late payments. A borrower must be reasonably certain that changes to their income will result in missed mortgage payments, according to reporter Kenneth Harney of the LA Times. Fannie Mae may modify the loan payment for a trial period, usually four months, and will make the payment change permanent if the borrower makes the lower payment on time during the trial period and the lost income is not restored.
Loan servicers will look at each loan modification on a case-by-case basis verifying income, checking credit and requesting supporting documentation to weed out borrowers “faking it” to get a lower payment. Now that Fannie Mae is on board with their program, the majority of the big players in the secondary market have some sort of early intervention program to assist borrowers at risk for foreclosure. This is key to stemming the tide of foreclosures that are destabilizing the housing market, in my opinion.
As a side note, a recent government survey found, of borrowers who negotiated loan modifications in the first quarter of 2008, more than 53% were missing payments within 6 months of the work out. Bob Tedeschi, reporter for the New York Times spoke with Steven Horne, a former Fannie Mae executive who suggested the cause of these failed modifications was inadequate analysis of the borrowers financial situation to structure a modification to “best meet the borrowers’ financial circumstances.”
Loan servicers were anxious to resolve the problem quickly, not spending the time or effort necessary to devise a workable solution. The advice of Mr. Horne is for consumers to be more proactive by studying their own finances thoroughly and asking their lender for more personal attention to their financial situation. One option for consumers is to visit the Internal Revenue Service website and type “Collection Financial Standards” into the search box. The program offers help, based on consumer surveys, of what one can reasonably expect to pay for housing, food, clothing, health care, utilities, housekeeping supplies and transportation. Sometimes these cost estimates are specific for the state where you live. Spread the word to those hoping to keep their homes out of foreclosure.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Great post Brad, thanks for sharing info that will help many home owners out there!
Rick
Very useful information . Thanks for sharing. many folks are in need of a loan modification lawyer or a real estate agent show specializes in short sales.
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