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Maybe you are thinking of calling a lawyer or a  loan modification agency. But how do you chose one or the other.  First let me say this, if you are struggling month to month,  falling behind on paymentS, or are facing foreclosure, you must call your bank today. I’ll say it again please call your bank today. Don’t be afraid to them and ask them for help. I have been very surprised when I called several banks for my clients, the people on the other line have been very friendly and helpful.  The bank may be able to reduce your payment to a more affordable level. Now don’t expect miracles, but they may reduce it enough for you to stay in your property.

If you are going to use a lawyer or loan modification agency ask to see what paperwork they will submit to the bank. How do they determine the Debt to Income (DTI) ratio. This is very important, some lawyers and agencies just pass the information you give them to your lender. You could have done this yourself and saved your money. Some don’t even predetermine if you would qualify for a loan modification. If they are not predetermining what you can really afford, they are just wasting your time and money. They should be providing your lender with a recommendation on what amount you could really afford based on your income/expenses. This is the reason you are paying them a fee. Everything else you could do yourself. A sample print out should show what your income is and what your expenses are, what interest rate and loan term changes are needed for you to afford your payments.

What about forensic audits? A forensic audit should only be used if you are prepared to file lawsuit to enforce the violations of your loan documentation. In other words, according to the lawyer I spoke to after paying for forensic audit, if they find any faults in the loan documents the only way to force the bank to make major changes to your loan like principal reduction would be to file a lawsuit. The estimated cost he gave me was minimum $7500, not including the court fees. In other words, they real you in with a promise and hit you with more fees. Try to go to a place that offers a free forensic audit, before paying for one.

My recommedation is to find a lawyer or agency that has the proper software to generate the loan modification proposal with a recommendation. If they don’t have a software program they are most likely doing it by hand, which means they are probably

Ever

What are my chances of a loan modification?

I usually hear this question three to four times a week. And while most lawyers and loan modification agencies want you to believe banks are giving out modifications left and right. The truth is banks for the most part are just moving the past due balances to the arrears and reducing the interest rate for 5 years. What if you are upside-down, how long will it take for you to make your money back?

Well, I read an article recently that mentioned that most homes have lost about 30% value in South Florida. Before the big housing boom, most areas appreciated about 3% a year. So lets say for the sake of argument, the housing market stabilizes this year and next year your house starts appreciating again after dropping 30% in value. How long will it take for your property to be worth the amount of money you owe using a 3% appreciation rate. You guessed it, about 10 years. That is not taking into account if the market remains flat for 2-3 years like most experts are predicting.

So at the end of ten years your property will be worth the amount of money you owe according to this article and you would have paid a whole lot of interest. I use this example often to illustrate that even if the bank accepts to modify your loan, it may take a long time for you to see a return on your investment.

Going back to what are your chances of a loan modification. It really all comes down to your DTI, debt to income ration. If you can prove you make enough money to cover your expenses and reduced mortgage and you have a valid hardship (divorce, medical, layoff, etc…), then you have a very good chance to be approved.  Just don’t expect the results that everyone is promising.

Till next time,

Ever

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Talk you soon and let me know if there is anything I can help answer for you about your situation. Thanks again and have a nice day.

Regards,

Ever