Are you having trouble paying your mortgage? Has your Adjustable Rate Mortgage adjusted so that you cannot afford the new payment? Were you placed into a bad loan and you can’t refinance into a good one?
The first thing that a homeowner should do is identify that the mortgage on their current property is a lawful one. Meaning that there are no Truth in Lending or RESPA violations and there wasn’t fraud involved on behalf of the lender or broker that originated your loan.
Have a lawyer examine your mortgage loan documents to see if there were any legal violations.
Get a complete written life of loan history to see all the bogus charges and fees included in their mortgage balance.
See if you are the victim of an inflated appraisal. Find out what comparable properties were selling for in your area at the time you took out your loan.
Red Flags and Things to Look Out For in Your Loan:
Start by comparing the loan you got with the one you thought you were getting. Are the terms the same? That is, is your Annual Percentage Rate (”APR”) the same as the one you were quoted? Are your total monthly payments the same as you were told they would be? Is there a prepayment penalty, and if so, were you told about this prepayment penalty?
If you have refinanced your primary residence, that is, the home your currently live in, then the first thing you should look at is the “notice of Right to Cancel” which is also called the Three Day Right of Rescission. Rescission means that you can cancel the contract. The law treats rescinded contracts as if they had never existed.
You have to be advised of this right in writing.
If the creditor fails to properly provide notice of this right to cancel, the right of rescission may be extended for up to three years. When the right is extended for three years you can rescind the loan at any time before three years, meaning that the loan is treated as if it never existed. Essentially, you become entitled to all profits made by the creditor as a result of this loan. This means that the creditor must refund all interest paid, all closing fees, all broker fees, and even pay for your attorney fees. As you can imagine, this amount can be quite significant. The extended right of rescission is a powerful tool to help borrowers who have been victims of predatory lending.
If it is determined that no laws have been violated on your mortgage, then it’s time to approach your lender for a possible loan workout or loan modification.
The factors they will look at are:
1. Nature of Hardship Causing Your Mortgage Problems
2. Ability to pay
3. Amount Owed
4. Equity in the property
5. Future financial situation
6. What is better for them. To foreclose or pursue a loan workout with you and or modify your loan. Meaning which approach will best benefit the lender in the long run.
A mortgage modification occurs where the parties to a problem loan mutually agree to workout the problem by creating new and better loan terms. The hope is that the new loan will enable to the borrower to meet their obligations.
When applying for a loan modification, make a game plan on how exactly you are going to approach them. These people want to minimizing loss for their company and they get paid to by getting the most amount of money out of you as possible or declare that your case is un-workable and foreclose on you. That is how they mitigate loss. If you understand this, then you’ll know that you have to approach them and all conversations very carefully.Everything can and will be used against you.
The lender will want to know about your financial status in order to decide if the loan can or should be modified. Gather your pay stubs, tax returns, bank account statements and other financial documents. The sooner you provide this information, the quicker the lender will be able to assess your situation.
They will also want to know your reasons for not making your mortgage payment. Is your problem temporary, such as unexpected medical bills or short term job loss? Is your problem going to be a long-term one? If it is long term, you may want to give up your house or provide a deed in lieu of foreclosure.
PREPARE A MONTHLY BUDGET. List your monthly expenses and income. If you are spending more than 38% of your monthly income on your house payment, chances are that you won't be able to afford your house. If you are close to this 38% limit, you have some hard choices to make. You can cut your expenses by eliminating luxuries such as vacations, health clubs and cable television. If you are eligible, you can take bankruptcy to get rid of your unsecured debt and "reaffirm" your mortgage. If you fall into this category, see a bankruptcy lawyer before doing anything else.
DO NOT SPEND YOUR HOUSE PAYMENTS. Often people stop making their payment because they are falling behind on other bills, or they can’t quite make the whole house payment. PAY YOUR HOUSE PAYMENT FIRST!!!
If you don’t pay your mortgage for 3-4 months and your lender decides to negotiate a repayment plan or a loan modification, then they will want what is called “good faith” money for you to come to the table with.
Contact your lender as soon as possible or have a third party handle it for you.
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