Loan Modification

[CaliforniaJ]

What is the name of your state? California

I'm in a mortgage that will reset in July '08. We are current with our payments now, but when it resets we'll be in trouble. Our area has seen rapidly declining home values, but we tried to refinance & got rejected. Our credit is mediocre and my wife has only been at her job about 10 months. I've contacted my mortgage servicer about a loan modification (it took a while before they'd talk to me about it). They don't do refinances in my state & we feel this is our only hope at this point. However, I'm not clear on what sort of qualification are needed for a loan modification and I've also heard that you need to already be behind in your payments, etc. before it will even be considered. Does anyone have any guidance on this?

We really want to stay in our home and can afford our current payments (which are already at 8.1%). We'll just be in trouble when it resets to 11.9% or higher.

Thank you.

[HUD-1]

A Loan Modification is a foreclosure prevention tool. The lender can extend the term and/or lower the interest rate in order to avoid foreclosing. A borrower usually has to be behind on their payments before the lender will start talks about Loan Mods. If they offer you one now, take them up on it, otherwise, clean your credit up and refi as soon as you can.

[CaliforniaJ]

Thanks for the feedback. I think we're between a rock and a hard place. We can help our mediocre credit only slightly in the near term, but maybe home values won't decline as much as they are supposed to & we still have a chance to refinance. When we tried recently, our credit wasn't the primary issue, it was that my wife needed 2 years on the job (she's at about 10 months now).

[nextwife]

Have you considered a second job for one of you to cover the higher payments? Are you cutting back expenses and purchases NOW to prepare? Stopped using credit cards? Severely limited planned holiday spending to save enough to make up the payments? Perhaps taking a seasonal job over the holidays to accumulate some safety net funds?

[CaliforniaJ]

Yep, we've stopped using credit cards a while ago and are trying to save now. Our current mortgage payments don't allow much room for saving though as we're stretched just to keep current. We're working to reduce household expenses further as well.

We are looking into second jobs, but so far, it's fleeting b/c our payments will increase nearly 50% as I look at it. The part time work won't nearly cover it. At least so far. If we both tried second jobs, child care would eat up most of the income.

I really appreciate the advice. The good thing is that we have a bit of time to continue to save and prepare and possibly attempt another refinance. It seems crazy that we still have some equity in our house, but the primary reason we were most recently denied is b/c my wife has only been with her employer about 10 months. And our credit is in the mid 650's.

[949]

question:
what was the term your wife's job before the current one?

why was the last job not considered into the length of job term?



who is your loan with?

i talked to a loan moder for option one today and they are willing to work with many of their customer to freeze their rates for now.

the facts about why companies want to help you.

it costs a company about 70k on average to foreclose a home.
it costs a company about 4k on average to help them refund late fees and put a freeze on the rate.

so they are just learning this at most companies and they are very happy to help you out. i just dont think they will help you with out proof that you are in distress. so by having missed a couple of payments will show them you are in distress. kinda sucks but if you keep a log of the person you are in contact with and telling them you are going to default when the rate is going to change, they will probably help you even sooner then later.

also if you are really in distress with no money they may even help you by lowering the rate just a bit. youll need to prove to them that will happen tho.