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Loan Modification Outlet offers mortgage modification relief for homeowners that are struggling with an adjustable rate mortgage or an employment issue that caused a loss of income. LMO offer loss mitigation solutions with low rate loan modifications that stop foreclosure!

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December 2008
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Loan Modification FAQ

15th December 2008

What are the chances of getting a loan modification through a company like Countrywide or WAMU if we are current on our mortgage?

Unfortunately most loan modification firms report better results from clients that were a few months late. It may be simply that mortgage lenders do not see the need to modify or restructure a loan in which the borrowers are not delinquent. With the foreclosure crisis moving down Main Street and hitting the prime credit homes, we may see these results change. For now distressed borrowers who are achieving better mortgage relief results because the mortgage lenders and investment banks do not want the deeply depreciated properties that will increase their loss even more.

Do you have to pay thousands of dollars to get a loan modification?

No, most mortgage lenders do not require borrowers to pay for a mortgage loan modification agreement. However, loan modifications can be complicated and most loan work-outs take 3-4 months to complete. The mortgage companies have not invested the build the staff needed to keep up with the demand of funding loss mitigation departments during this foreclosure crisis. Paying a law office or loan modification company a few thousand dollars to negotiate a new mortgage with lowered interest rates that potentially could save you hundreds of thousands of dollars is a small price to pay for such a significant financial gain.

Is Loan modification the best solution to losing a home to foreclosure?

Loan modifications have become the most popular choice for loan relief for homeowners. It is not the only loss mitigation solution however. Traditional refinancing has typically been rejected before applying for a loan modification. If you have a significant amount of equity left in your home, a foreclosure bailout loan may be an option to get your outstanding balance caught up, but the interest rate are usually high with hard money loans, so it would be more like a band-aid. Short Sales can be effective if you absolutely can’t afford your home with or without the modification or maybe you believe that you’re home is so far underwater with your mortgage balance being so much greater than the property value that you would rather sell it short and move on.

Is it lawful to charge homeowners money upfront to assist in negotiating a loan modification with the lenders loss mitigation department?

Foreclosure prevention has evolved into a big business. With millions of delinquent borrowers facing foreclosure, the demand for negotiating services has escalated into a new type of loan origination. Attorneys are allowed to charge for their legal advice in advance. If you are working with a non attorney backed loan modification or real estate broker they are required to hold any money advanced in an escrow account until a loan modification is agreed. Predatory lending laws are in the process of changes to protect homeowners against abusive practices from unscrupulous mortgage lenders.

If a loan workout is not achieved what are my other options?

Let’s face it; you don’t always get everything you want in the first stages of loss mitigation. Short sale, forbearance, and a deed in Lieu are several popular alternatives if a loan modification is not initially negotiated with the mortgage lender to check out.

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At this point, clearly the Bush administration is stalling on following FDIC Chairwoman Sheila Bair’s recommended loan modification plan.  Lawmakers have begun taking matters into their own hands.  Last week, Rep. Maxine Waters, D-California, introduced the first legislation incorporating Bair’s proposal to systematically restructure mortgages and provide a government guarantee against default. The measure is estimated to ultimately save 1.5 million homeowners from foreclosure and would cost $24.4 billion, which Waters would take from the $700 billion financial industry bailout bill.  “The current foreclosure crisis continues to spiral out of control and our current programs for dealing with this crisis are simply not getting the job done,” Waters said.  Waters’ action is one more sign that Democratic lawmakers want more to be done to help minimize the crisis of delinquent homeowners. Rep. Barney Frank, D-Mass., head of the powerful House Financial Services Committee, said Monday that any new proposals involving the bailout funds must include foreclosure prevention programs.  Waters’ bill, however, will likely have to be reintroduced when the new Congress takes office next year unless similar measures are worked into any new bailout proposals. Several banks, and mortgage lending companies Fannie Mae and Freddie Mac, have recently put their own loan modification plans into place. And as part of its federal bailout, Citigroup must start provide loan modifications in accordance with Bair’s guidelines.


Meanwhile, the number of homes falling into foreclosure is rising daily. A record 1.35 million homes are in foreclosure and a historic high 6.99% of borrowers are behind on their payments, the Mortgage Bankers Association reported last week.  Bair has been a vocal advocate for rolling out a systematic mortgage modification plan and she actually put her loan mod plan into action with IndyMac, which the FDIC took over in July.  Reports have indicated that FDIC officials had a role in restructuring over 5,000 home loans as of mid-November.

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Foreclosure relief plans, like loan modifications and forbearance continue to be called the best solution to tone down the rising foreclosure crisis.  The government want homeowners to be able to stay in their homes and weather the storms.  Clearly they will need significant participation from the mortgage lenders and investors that hold the mortgage notes. 

Federal Reserve Chairman Ben Bernanke said Thursday that the government must do more to address foreclosures.  Bernanke, speaking at a Fed conference in Washington, D.C., said that beyond just keeping homeowners in their homes, the Fed must continue to focus on foreclosure prevention to help stabilize the housing market and economy as a whole.  “The housing market remains central to the economic and financial challenges that we face,” Bernanke said. “Reducing the number of preventable foreclosures would not only help families stay in their homes, it would confer much wider benefits.”  The Fed chief says a revitalized housing market is key to economic recovery, and that foreclosure prevention deserves increased government attention.

According to Bernanke, about 15% to 20% of borrowers are “underwater” on their mortgage loans, meaning their homes are worth less than they owe. In addition, he said, 20% of sub-prime mortgage loans are seriously delinquent. Bernanke estimated that 2.3 million foreclosures will be initiated in 2008, compared to an average of 1 million before the mortgage meltdown.  Bernanke said the Fed, Treasury Department and Federal Deposit Insurance Corp. have already planned or put in place several measures aimed at stemming foreclosures.   The government has, among other things, cut mortgage rates and announced a plan to buy $500 billion of mortgage loan-backed securities and $100 billion of debt issued by government-sponsored mortgage financers Fannie Mae and Freddie Mac.But Bernanke said more can still be done and outlined several “promising programs.” One was FDIC Chairwoman Sheila Bair’s loan modification plan, which would lower mortgage rates, extend loan terms and offer government insurance against bank losses if borrowers who receive help end up in default anyway.   Another proposal includes strengthening the Federal Housing Administration’s Hope for Homeowners program by reducing the premiums paid by the lender. Bernanke suggested that Congress could give FHA home loans the ability to set premiums on a case-by-case basis rather than an across-the-board approach.

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A mortgage loan modification is when the mortgage lender agrees to modify your existing mortgage in order to keep you in your home in lieu of your hardship. The loan modification agreement was designed to help make your current loan more affordable. Usually it is accomplished by the lender agreeing to lower the mortgage rate that in turn reduces the monthly payment for a few years. Years ago this was only available when a homeowner was seriously delinquent and suffered a hardship such as a job loss, divorce or illness. Now, homeowners can obtain loan relief from their mortgage lender for more affordable payment solutions to combat the foreclosure crisis and eliminate the interest rate adjustments from your adjustable rate mortgage loans.

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