The majority of the complaints filed with the state attorney general’s office have been against Bank of America, but other customers have complained about other lenders, as well, including JP Morgan Chase and Wells Fargo, which acquired Wachovia. It is in the bank’s as well as the consumer’s best interest to modify, rather than to foreclose. But, there still seems to be a lot of red tape involved.
Consumers have reported waiting months only to find out that they have been denied. In some cases, they are accepted into the “trial” program. One woman reported paying her mortgage payments up through January of 2010. But, she was still denied for refinancing by her bank.
Although it may be a hassle, it is still worth your while to apply for a home loan modification if you are having trouble paying your mortgage or your other bills. If you are using credit cards to pay your utility payments or buy groceries, then your mortgage payment is probably not affordable. Ideally, it should be no more than 30% of your total monthly income.
If there has been a change in your monthly income since you first obtained your mortgage, that’s a good reason to apply. If your mortgage is backed by Freddie Mac or Fannie Mae, that is a good reason to apply. Most HUD loans qualify, as well.
The government has offered incentives to banks if they are willing to offer a home mortgage modification as an alternative to foreclosure. Despite the new programs, there have been thousands of foreclosures this year.
According to government estimates, about a half million people are in the trial stage of the process. During the trial period, which normally lasts for three months, homeowners are allowed to make lower mortgage payments. If they make those payments on time, then the bank will usually qualify them for permanent refinancing.
Fees that can be rolled into the new balance include legal fees related to initiating a foreclosure, Homeowner’s Association fees and bills that could cause a lien to be placed on the property. In order to use the home loan modification option, lenders are required to waive any late charges that have accrued. That alone could amount to hundreds or even thousands of dollars in savings.
Typically, the bank is able to reduce the monthly payment by lowering the interest rate. Rates as low as 2% are being seen in some of the new loans. If you are interested in applying, you should contact your current lender and stay in contact with them throughout the process.
Be sure that they have accurate phone numbers. Some banks have stated that they could not reach the customers and denied the final acceptance because of their inability to reach homeowners with the contact information the banks have on file.
As well, homeowners could still be denied because of insufficient income. There is no guarantee that anyone will qualify, but the government seems to think that most people will, as long as all of the parties are willing to meet somewhere in the middle.
It is important for borrowers to think about whether or not the new payment offered is actually affordable. It is possible that a home loan modification is not the right choice in certain circumstances. It might not be the right choice for the bank, either.
The banks must follow the FDIC guidelines when they are making these modifications. The number of bank failures this year has hit the highest point since the savings and loan crisis of 1992. Those failures have cost the FDIC billions of dollars. So, they have a say in whether or not your bank can offer a home loan modification or not.
One of the FDIC guidelines that your bank will adhere to is making a full review of your financial situation. If it appears that you are unable to make the reduced payments or if you are not considered “credit worthy”, they can deny your loan without risk of being criticized by government regulators.
If the government’s home loan modification program does not work for you, there are other options to consider. Although modifying the terms of a loan has been the most popular option recently, it is certainly not the only one available for borrowers attempting to stop foreclosure.