Friday, February 19, 2010

Loan modifications - Have Realistic Expectations

Many homeowners have very emotional connections to their home and it can often cloud their judgment when it comes to trying to save their home. If the homeowner doesn't have steady income, the bank is very unlikely to do anything to keep you in your home. The banks only look to financial performance, reward, and risk, and if you don't have current income, you are extremely risky. The banks see this over and over where they provide some form of assistance only to have the homeowner default down the road because they think they will start doing better financially, only to realize that the economy is not picking up in 2010 as many expected.

If you are living off withdrawals from retirement accounts, credit cards, or loans from family and friends, a mere change in the terms of your home mortgage is probably not going to be enough to save your home. The banks see this other debt and often take it into account when deciding whether to provide you a loan workout. If you think of a modification as a refinance, you will have more realistic expectations. In a refi, if you don't have verifiable income, reliable income, low other debt, and decent FICO scores, it is too risky for the bank and they will say no. Often clients try to argue that it makes financial sense to keep the person in their home versus foreclosing. The banks have their own internal numbers and they are more than willing to take substantial losses to be done with that loan since it is often not a valuable loan for them to service or sell.

Homeowners should think about what if a loan modification is denied, have they thought about turning the house over with a deed in lieu of foreclosure to avoid personal liability for the loan. Have they thought about a short sale to also avoid personal liability for the loan? Do they realize that once the home is in foreclosure, it is very difficult to get back out and foreclosure and evictions on your record are equal to or worse than bankruptcy. A person in bankruptcy can get a rental apartment because they are in a better financial position now that certain debts are gone; however, someone who had to be evicted tells a landlord that if they have to remove that person, it is going to cost time and money because that person is not willing to move out voluntarily.

For more information on bankruptcy, foreclosure, and loan modifications, visit our website or give us a call 888-881-6591.

Chris Barsness, Esq.

Tuesday, February 2, 2010

Eliminate 2nd and 3rd mortgage, reduce principal

Many homeowners are pounding their heads against a wall trying to get lenders to work to get them current or give them some form of loan modification. Many of these homeowners have been taking out of credit cards, personal loans, or other sources just to survive. However, many lenders look at large amounts of other debt negatively when considering your total debt to income ratio in a modification. These homeowners don't realize that a loan modification is not going to suddenly save them from the brink.

Often times a bankruptcy filing is a better option. It can eliminate the other credit card debts, personal loans, 2nd mortgages, and 3rd mortgages. It all depends upon the type of filing under what chapter of the Bankruptcy Code, but it is even possible to force principal reduction in some cases. Although there have been attempts at federal legislation over the last year to allow bankruptcy judges to force modification of terms of mortgages on principal residences, they are always defeated. There are ways to eliminate 2nd mortgages even on principal residences in some cases.

Homeowners needs to look at all their options and not delaying because your lender will move a foreclosure forward no matter how seemingly nice them seem on the phone.

For more information, contact us or view our website.