TRUE lenders are not bending over backwards for homeowners to help them go thru these hard times we all are going through. But the fact of the matter is that an increasing number of homeowners are getting successful and aggressive loan modifications, and it is the truly educated homeowners who are receiving the most benefits.
As an expert on loan modification programs and short sale, and being on the front line, advocating for homeowners daily, I think it will be helpful to dispel rumors regarding loan modification to help educate homeowners and the media on how loan modifications can help those facing financial hardship. I just got a call today from someone who paid fees to the tune of $40-50K to help modify two loans, of which, one has already gone to foreclosure.
Rumor: I spoke with a loss mitigation specialist; they told me that lenders are offering principal balance reductions on loans that are “upside down.”
Truth: Yes, balance reductions are in some cases offered, but this is incredibly rare. It’s like winning the lottery if you can get it.
Typically, the only cases in which balance reductions are approved are cases in which a second lien holder (the bank holding the second mortgage) is holding a lien on a property in which if the property was to go to foreclosure, they would receive absolutely no proceeds from the sale. In these cases, and only if the borrower’s continued ability to make their mortgage payments is hinged upon them receiving a lower balance on their second mortgage, the second lien holder may grant a request for a balance reduction.
There are many loan modification scam companies out there that promise balance reductions. The very idea that a balance reduction could / would be performed on each and every loan modification is completely unreal and flat out idotic . Take a moment to consider: If lenders started lowering mortgage balances for homeowners on a regular basis, first and foremost the investors that hold these loans would never buy mortgage backed securities form the servicer again. Additionally, homeowners across America would expect similar treatment.
Rumor: Hope Now and 995-HOPE will get you a loan modification and protect your best interests.
Truth: No way.
First and foremost, Hope Now is funded by lenders. Re-read the previous rumor, call your lender, and you’ll get an idea of exactly how much your lender would want to help you. Hope Now helps homeowners get horrible loan modifications. Over 50% of the clients that have received loan modifications have re-defaulted (are late and facing foreclosure again). They are actually old news as far as I am concerned.
Rumor: I was told by my lender that I have to be late on my mortgage to qualify for a mortgage loan modification.
Truth: You do not necessarily have to be late on your mortgage payments.
If your lender participates in Obama’s Home Affordable Modification Program, you do not have to be late on your mortgage payment to qualify for a loan modification, however you do need to exhibit documentation that shows that you will default on your next mortgage payment.
Some interesting Q&A’s specially for this tax season.
Former client : Hi Ken, I got a letter from the IRS, asking for a 1099 S that I should have filled with my tax preparers. I filled a 1099 C and my tax person filled the correct form 982 per your advice, can you please tell me what this is?
Ken Go: This is a client that did a short sale in the past that we closed in 2009. This looks like a letter from the IRS saying that the sale of the property was not included in the tax return. When we closed the short sale, the escrow company provided a 1099S to be filled with taxes for the same year. Please go to the tax preparer and find out how to include the sale information(maybe it was included as I think there is a reporting exemption for the sale, if the property was your principal residence).
Reminder : If you do a Short Sale, please make sure your tax preparer is aware of all the forms needed. I don’t suggest that you do it yourself.
Caller: I have missed my mortgage payments for over 8 months and the lender has not foreclosed. I am really worried that they might just lock our house up and leave us homeless. What should I do?
Ken Go: First, you should not wait for the lender to throw you out. You have options that your lender might help you with, to see if you can modify your loan. Seems like you just want to leave the house, the property is worth half of what is owed. Because of the amount of maintenance needed done, I actually understand these homeowners. The wife ask me why the lender has not done any foreclosing. I went to a bank meeting and learned that some banks are holding off foreclosure to make their book value look good. Meaning, if they don’t have that many foreclosures or non- paying assets in their accounts, their accounting department will value their assets more than what should be. This is done quarterly, so this client might have been lucky to be in the quarter that the lenders needed to show better numbers. It’s still all about Wall Street and politics. However, sooner than later, they will come knocking on your door for their payments.
Thanks for all your inquiries and referrals, I am actually getting referrals for some short sales and refinancing, which is great. I have told a caller I do this for free but if an opportunity comes my way, I also would like to put food on the table for my family. Remember, I am all about your intrest first before mine. Thanks for understanding.
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Please call Ken Go of 1st Innovative Finance Group at (562)508-7048 or write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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