Loan modification enables distressed mortgage holders to reduce their principal and interest. But statistics show many American mortgage holders cant tap into the benefit of loan modification.
According to a Wall Street Journal piece on mortgages,
Most delinquent mortgages aren’t available for sale because they are locked up in so-called private-label securities (the ones packaged by Wall Street during the boom) or in the hands of Fannie Mae or Freddie Mac.
What this means is, Although a mortgage company has issued the loan, the loan is owned by third parties. The rules governing this arrangement prevent the issuer from modifying the loans. A modification would subject the servicing firm to the risk of lawsuits by the owners of the securities.
Because of this tight arrangement the mortgage companies find their hands tied and they cant help their borrowers.
written by Constantine Njeru
\\ tags: American Mortgage, Boom, Borrowers, Delinquent Mortgages, Fannie Mae, Freddie Mac, Lawsuits, Loan Mortgage, Mortgage Companies, Mortgage Company, Mortgage Holders, Mortgage Loan Modification, Principal And Interest, Private Label, Qualify For Mortgage, Tap, Third Parties, Wall Street, Wall Street Journal, What This Means
If you own a residential mortgage and you are behind with your monthly payments you can consider a loan modification. A loan modification cuts payment it can either be the monthly interest or the principal.
Banks are reluctant to reduce the principal, because that would require them to recognize losses when reporting quarterly financial results. Their modifications policy is to reduce the interest rate or giving the borrower more time to pay.
One company that specializes in reducing the principal is Selene Residential Mortgage Fund. Selene Mortgage fund buys loans, mostly from banks, at steep discounts to the balance due. Once the company owns the loan it renegotiates the terms with borrower.
In a Wallstreet journal case study, a borrower who worked with Selene Mortgage Fund was able to drastically reduce the principal plus interest.
The balance due was cut to $243,182 from $421,731, and the interest rate was lowered. Those steps reduced the monthly payment to $1,573 from $3,464, allowing the family to stay in their home despite a drop in Mr. Reynolds’ income as a real-estate agent.
written by Constantine Njeru
\\ tags: Case Study, Interest Rate, Losses, Mortgage Fund, Mortgage Loan Modification, Mortgage Loans, Mortgage Tips, Mr Reynolds, Principal Banks, Principal Mortgage, Principal Residential, Quarterly Financial Results, Real Estate Agent, Residential Mortgage, Steep Discounts, Wallstreet Journal
When you apply for a mortgage, the mortgage lender will evaluate your application based on these four factors, capacity, capital, collateral and credit.When you meet them for face to face interview the questions will revolve around these four factors. Your ability to answer the questions in a satisfactory manner will determine whether your mortgage loan application is approved
What Mortgage Lenders Evaluate
This four factors are well explained by the following article that was originally published at Freddie Mac Website
Capacity
Capacity is your current and future ability to make payments. Lenders will look at your income, employment history, savings, and monthly debt payments.
Capital
Capital, or cash reserves, refers to the reserves of money and savings, investments, properties and other assets that belong to an individual and that can be sold relatively quickly for necessary cash.
Lenders will evaluate your application more favorably if you can verify that you have cash reserves. Cash reserves show the lender that you can manage your money well and that you can count on other funds, in addition to your income, to pay the debt.
Collateral
The lender will take a look at all your possessions and property that you can pledge as security for debt.
Credit
Lenders look at your credit and on-time payment history to see your record of paying bills and debts.
Lenders will ask for financial statements to see if you meet all of their criteria. Sometimes your strength in one area can cancel out your weakness in another.
written by Constantine Njeru
\\ tags: Assets, Cash Reserves, Collateral, Credit Lenders, Debt Credit, Debt Payments, Debts, Employment History, Financial Statements, Freddie Mac, Income Employment, Mac Website, Mortgage Lender, Mortgage Lenders, Mortgage Loan Application, Payment History, Pledge, Possessions, Satisfactory Manner, Time Payment
Mortgage owners who cant keep up with monthly payments are making a drastic decision by walking away from their mortgages. Mortgage companies refer to it as strategic default.
Walking away from a mortgage can be in your own best financial interest, after all big real estate companies do this every day. But before you make that decision make sure you are familiar with your states rules on mortgage defaults. Some states are pro borrowers while others are pro lenders.
Some Risks and Cost associated with walking away from a mortgage
- In certain states, a borrower can be sued and personal assets can be subject to a deficiency judgment.
- Once a mortgage goes into default, a borrower’s credit rating is severely tarnished, making it more expensive, if not impossible, to qualify for any new form of credit.
- anything that involves a credit review, such as obtaining auto insurance or getting a new job, can be complicated.
Before you make the decision to walk away from your mortgage consider the above cost. Everything in life has risk
written by Constantine Njeru
\\ tags: Auto Insurance, Borrowers, Credit Rating, Deficiency Judgment, Drastic Decision, Financial Interest, Insurance, Lenders, Mortgage Companies, Mortgage Defaults, Mortgage Mortgage, Mortgages, New Job, Personal Assets, Real Estate Companies, Risk
With the prevailing low interest rates it is better to take a mortgage than to pay cash. Even if you can afford to pay cash for a home, buying it with borrowed money and investing your money elsewhere is a smart move.
With mortgage rates as low as below 5% you could take a mortgage and invest the money in a well-diversified portfolio aiming to return 8% a year over 10 to 15 years.
written by Constantine Njeru
\\ tags: Diversified Portfolio, Invest, Low Interest Rates, Money, Mortgage Rates, Smart Move
If you have a house mortgage that is 50% over the value of the house…WALK AWAY FROM IT…never never send them another dime, don’t talk to them ignore them. Eventually they will evict you, it may take up to a year.
They will offer all kinds of deals…IGNORE THEM!…you will only go deeper into debt eventually…they are not giving away anything but YOUR TIME and FUTURE.
Rent a cheap place until you are fully out of debt. Stay in CASH mode until you can afford a modest home once again, a home that you should put 50% down on in CASH…takes time but then you are a free person. You will be amazed when you discover you have 30% more income than when you were on a credit basis.
written by Constantine Njeru
\\ tags: Credit Basis, Debt Free, Free Person, House Mortgage, Mortgage Debt
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