Each year many people are denied for their mortgage refinance and loan modifications. The sad truth is, is that many people are given the wrong information when dealing with their mortgages and housing. It is really important to know your options when trying to refinance or modify your loan.
Approximately 80% of all loan modifications are ineligible for the Home Affordable Modification Program (H.A.M.P. ), according to an article in the Huffington Post on January 9, 2012. Most H.A.M.P. modifications applications are denied because they simply do not meet H.A.M.P. requirements. In order for a loan to qualify for the H.A.M.P. program, all loans must meet the following criteria:
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* Homes must be occupied by primary borrower.
* Loan must have been originated on or before January 1, 2009.
* Mortgages must be delinquent or in risk of default.
* Mortgage could not have been previously modified under H.A.M.P.
* Your current mortgage payment must exceed 31% of your monthly gross income.
* You must have a document-able hardship.
* Applicants must document all income.
* Loan balances must not exceed $729,750
* Properties must not be vacant.
* Loan must be owned by Fannie Mae or Freddie Mac
* Personal financial situations must pass the Net Present Value Test.
If your loan does not meet these primary qualifications a H.A.M.P.loan modification will not be granted. The H.A.M.P. guidelines require all loans to meet specific debt and housing ratios before they can even qualify for the H.A.M.P. Program. So in essence the primary reason most loan modification applications are not approved is because they are not structured properly or do not meet investor guidelines.
Many loan modifications are denied because the income and expense ratios do not meet investor guidelines. H.A.M.P. requires housing payment to equal 31 percent of household income. There is a very tight band of housing and debt ratios and if your income deviates too much from these perimeters, your loan will not modified.
Borrowers may be able to add relatives or income from other family members in order to qualify. Other times, there is too much income and the lender will not see a sufficient enough reason for a hardship Every borrower must understand that loan modifications must make sense to the investor.
Banks simply can not just give modifications to everyone because their house lost value. The modification has to be the most favorable choice for the investor. If a homeowner has significant equity they will not qualify for a modification regardless of what the hardship is. This is because the homeowner can simply sell the house and eliminate the now excessive mortgage payment.
Many people in the Chicago area had their property taxes increase and their properties have gone down in value.This puts the homeowner in a bad position because now they can not sell the house or afford to refinance.There may be options for this type of person, which is quite common.
Regardless of what you may have read, the banks do not want your house. Nor do they care to foreclose on your house. The foreclosure process is expensive and there are certain procedures the lenders must follow in every state. This complicates things for the big lenders because not all states have the same laws. Troubled homeowners can use this to their advantage to get a loan modification and stop the foreclosure process all together.
For those who's loans do not meet the H.A.M.P. guidelines, they can apply for an external modification. Most lenders will provide external modifications but you have to ask for them. With an external modification, investors will sometimes provide comparable loan modifications to those of the H.A.M.P. program even if the loans do not meet the criteria.They offer this again to protect their interest in the property and their shareholders.
It is important that homeowners must understand exactly what the banks are looking for when making modifications. If your modification was denied,homeowners should ask their banks if they offer any external modification programs. Borrowers must also evaluate whether or not their loan meets the criteria for a modification. Some loans may also qualify for the Home Affordable Refinance Program if they are underwater.
The bottom line is that homeowners truly need to know what their options really are. Sometimes a Realtor will try to encourage a homeowner just to sell the property. Homeowners must make a decision if they want to keep their homes or not. Sometimes it makes sense to sell, many times it makes sense to keep your home if you could obtain a loan modification. Not knowing your options could end up costing you your home.
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