Immigration Atty. Crispin Lozano
Question: What is a short sale?
Answer: A short sale is a sale of real property in which the sale proceeds fall short of the balance owed on the property’s loan. It happens when the borrower cannot pay the mortgage loan on the property and the lender decides to sell the property to a third party at a moderate loss rather than pursuing a foreclosure action.
Question: How does a short sale works?
The reasons for the increase in delinquencies are (1) more option Adjustable Rate Mortgages (ARM) are resetting to higher rates triggering defaults and (2) more prime fixed-rate loans are defaulting due to job losses.
Question: What is the Making Home Affordable Refinance (HARP) program?
Answer: The program is for borrowers who are current on their mortgage but are unable to take advantage of the current lower interest rate because their homes decreased in value. Eligible borrowers may be able to refinance under this program.TheUS Treasury Department reported last September 24, 2009, that the Home Affordable Modification Program (HAMP) of the Obama Administration is making progress. There are 57 servicers (Banks and Mortgage companies) who contracted with the government to do loan modification. These servicers committed a cumulative target of 500,000 trial modifications by November 1, 2009. As of September 9, 2009, there are 360,000 trial modifications that are underway out of the 570,000 trial modifications that have been offered to borrowers under this program. About 85% of the loans in the country are covered by this program.
Question: What is the government’s loan modification program?
Answer: It is a government assistance to loan servicers (banks) and investors to help offset the cost of modifying homeowner’s mortgages into affordable mortgages that will allow them to keep their homes. This may be done by reducing mortgage interest rate, extending the term of the loan, principal reduction if necessary. The program begins in March 4, 2009 until December 31, 2012.
Question: When do you hire an attorney to negotiate loan modification?
Answer: The best time to hire an attorney to negotiate a loan modification is when you started to feel that your financial situation cannot sustain the continuous payment of your mortgage under the current terms. Many mortgages will reset to a higher payment terms after the expiry of the interest only or minimum payment terms. If the monthly payments will reset and you have not modified your loan there is a great chance that you could not afford the monthly payment because any unpaid interest during the minimum payment period is added to the principal amount. This new principal amount will be the basis of computing your monthly interest and principal payment. Many interest only and option ARM mortgages will reset by year end and by the year 2010. However you can still hire an attorney anytime during the foreclosure process to protect your rights and to save your home.Question: Are lenders required to modify my mortgage?
Answer: No. Loan modification is voluntary on the part of the lenders. The bank will analyze your financial capability to continue paying the loan once it is modified. They also review your hardship to justify modifying your loan. Before modifying a loan, many banks offer a trial forbearance of three months before offering loan modification. The reason is they want to be sure that you can still pay your mortgage once it is modified.
Question: What is a Notice of Default?
Answer: A Notice of Default (NOD) is a letter addressed to the borrower informing him or her that the loan is in arrears for about four or more months and the lender is initiating a foreclosure process. The borrower has to make the account current within 90 days or the property will be sold at public auction. The NOD is usually sent by certified mail.
Question: What can a borrower do when he or she received a NOD?
Answer: During the 90 day period given by the lender in the NOD the borrower can apply for loan modification, or have the property sold under short sale or pay the full amount of arrears to avoid foreclosure.
Three months ago, Mr. Rof Santa Clara County came to my office after a Notice of Default has been filed but before the date of Trustee Sale. We immediately contacted the lender and we submitted the required documents. We requested a reduction in interest rate from 7 percent to 4 percent; a reduction in principal to current fair market value and a forgiveness of all missed payments and late fees. After interview by the lender, Mr. Rwas granted a forgiveness of all missed payments and penalties, a reduction in interest rate to 4 percent and a reduction in the principal balance of the loan by $102,000. In this case, Mr. Rmade the right decision to request for loan modification before the date of Trustee sale.
Question: What is a Notice of Trustee Sale?
Answer: A Notice of Trustee Sale informs the borrower that his or her house will be sold at public auction by the lender (the Trustee) on the date specified in the notice. Usually, the lender is also the buyer in public auction.
Question: What is the reason why it is hard to deal with the banks when requesting a loan modification?
Answer: The main reason why it is hard to deal with the banks when requesting loan modification is that they will lose money in modifying loans. Although the government is sharing with the banks in the losses incurred in loan modification by about 50%, the banks share of the cost is the other half. Unless the bank is convinced that the borrower’s only option is to have the property foreclosed, they will not modify the loan.
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