There are several options available to those seeking Loan Modification or Loss Mitigation. What I am going to do is explain those options, the facts, the eligibility and the procedures involved. Every case is different and may have different factors involved, so here are the basics. My hope is to help you understand the options and what is involved.

LOAN MODIFICATION OPTION

Loan modification options provide a temporary or permanent change to one or more of the terms of a homeowners loan, allowing a loan to be reinstated and resulting in a payment the homeowner can afford. Most loan modifications provide rate reductions, term extensions, or principal reductions. Program details differ between lenders and often change daily.

facts

* A temporary or permanent change in interest rate.

* Capitalization of delinquent items of principle, interest or security deposit.

* Possible extension of the term of the loan.

*Maximum interest rate adjustment to the current market rate, however, in some cases, interest rates may be reduced below market.

* Modified principal balance may exceed 100% loan to value.

* The Loan Modification must fully reinstate the loan.

Eligibility

*Lender preparation requirements, likely 12 months.

* Owner must be 30 days delinquent (1 full payment due and unpaid) or more; unless an adjustable mortgage must be reinstated within 90 days or negatively amortized. (case by case)

* Default due to a verifiable loss of income or increase in living expenses.

* Owner-occupant, committed to occupying the property as a primary residence.

* The stabilized surplus/deficit must fully restore the loan.

procedures

* The lender is required to evaluate the financial condition of the owners.

* The lender must verify that the property does not have adverse physical conditions.

* Home repair costs may not be calculated in the loan modification.

* Lender must comply with state and federal disclosure laws or notice requirements, including if recording is necessary to maintain first link requirements.

* Loans reinstated through a Loan Modification within the past year require written justification prior to a subsequent modification.

* The subsequent reason for non-compliance cannot be related to the previous reason for non-compliance.

SPECIAL TOLERANCE OPTION

Special forbearance is a written agreement between Homeowner and Lender that consists of a plan that allows Homeowner to reinstate their loan.

facts

* Gives rise to the replacement of the loan.

* Lender sets maximum duration.

* Must be in writing and indicate previous missed mortgage payments.

* Provides fail options.

Special Indulgence Type I

* The special leniency fee should be based on the owners ability to pay.

* You may allow for reasonable foreclosure costs and late fees accrued prior to the execution of the agreement.

*Minimum duration of 2 months with a lender specified maximum period of time to pay the arrears when required payments increase.

* Allow the Owner to prepay the delinquency at any time.

The cause of non-compliance is unemployment

* Owner has a good payment history and stable employment history.

*Based on Owners ability to pay, Lender may require partial payment; as the amount of the monthly security deposit requirement.

* Owner agrees to actively seek employment during the term of the special forbearance.

* Owner immediately notifies lender when employment status changes.

Special Indulgence Type II

A Type II Special Forbearance combines a short-term Special Forbearance with a Loan Modification or Partial Claim as a single Loss Mitigation option.

* Loan must be three (3) months past due, maximum is lender specific months past due.

* Requires monthly payments of at least three (3) installments before completing the Loan Modification or Partial Claim.

* You must have a verifiable decrease in income or increase in living expenses, but have or will have enough monthly income to correct the delinquency and reinstate the loan within the life of the plan.

failure options

The definition of failure of the Special Forbearance Option is provided below. These options must be included in the written Special Forbearance Agreement.

* The Owner abandons the property.

* Owner informs Lender that it will not follow or abide by the terms of the Special Forbearance Agreement.

* Owner allows two installments to become due and unpaid without notifying Lender of any issues that prevent Owner from keeping current under the terms of the Forbearance.

SALE PROGRAM PRIOR TO MORTGAGE FORECLOSURE (SHORT SALE)

The Pre-Foreclosure Sale Program allows a Homeowner in default to sell their home and use the proceeds of the sale to satisfy the mortgage debt, even if the proceeds are less than the amount owed.

facts

* Cash sales to a third party. It must be an “arm’s length” transaction.

* Lenders may allow any reasonable cost of sale, including up to 6% sales commission, state/local transfer tax stamp, and other customary closing costs such as the cost of a title search, appraisal, and home insurance. qualification.

* The appraised value must be at least 55% of the outstanding mortgage. Mortgage borrowing=principle and interest only.

* Net proceeds from sales must be at least 65% of the “as is” appraised value of the property, defined as the sale price less sales commission and consideration paid to the seller, the amount to settle any lien (not to exceed $1,000) and sellers’ usual closing costs .

Eligibility

* Property must be owner-occupied, not walk-a-ways or investment properties. Exceptions: when it is proven that the need to evict was related to the cause of the breach (job loss, transfer, divorce, death), and the property in question was not purchased as a rental investment, or was used as a rental for more than 12 months.

* Owner must be 31 days or more delinquent at closing of sale prior to foreclosure.

* Owner must provide documentation of a decrease in income or increase in living expenses, and documentation verifying that Owners need to vacate the property.

procedures

* Owner agrees to show good faith in attempting to market and sell the property.

*Owner is required to perform all normal maintenance and repairs on the property until the closing of the pre-foreclosure sale.

*Owner must list property with a licensed Real Estate Broker, not related to Owner. The listing agreement must include a specific cancellation clause in case the terms of the sales are not acceptable to the lender.

DEED IN LIEU OF FORECLOSURE OPTION

The deed-in-lieu of foreclosure allows a homeowner in default, who does not qualify for any other loss mitigation option, to sign the home back to the mortgage company.

facts

* Homeowners’ income must be applied to any liens placed on the mortgaged property.

* The owner must agree to the “written” agreement of the conditions of the property.

* Lenders may determine that a “current” homeowner is eligible for the deed-in-lieu option

Eligibility

* Property must be owner-occupied, with no “walk-a-ways” or investment properties. Exceptions: when it is proven that the need to evict was related to the cause of the breach (job loss, transfer, divorce, death), and the property in question was not purchased as a rental investment, or was used as a rental for more than 12 months.

* Owner must be 31 days delinquent or more at the time of executing the Special Deed of Lieu of Security.

* The owner must provide documentation of a decrease in income or an increase in living expenses, and documentation verifying that the borrowers need to vacate the property.

*Lender will develop a Deed-in-Lieu of Foreclosure Agreement, which must be signed by both Homeowner and Lender, containing all of the conditions under which the Deed-in-Lieu of Foreclosure will be accepted.

I hope this is helpful for those of you who are looking into some of these options. Knowing your options and the procedures involved are essential so that you can be aware of your situation. Please do your due diligence for help in these matters. Time is not on your side and the Lender has the Lender’s best interest in mind, not you, the Owner. Seek qualified professional help to address these issues. Your friends, brothers, best friends, sisters-in-law, uncle may not be the best person to take your advice!