Tina To's Real Estate Blog

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Many homeowners always face a dilemma whether they should continue to pay their mortgage or not paying it so as to draw lender’s attention to their loan modification request.  As many homeowners are now marginal payers who can barely afford to pay their mortgages while they feel completely unfair that their counterparts can enjoy a 50% discount on the same house they own with a 30% discount on the interest rate, they surely want to be treated the same.  In the meantime, they are afraid that if they are behind the payment, their credit will be ruined so they will not be able to get a better loan.

In order to be successful in negotiating a better loan, the homeowners have to do several things.  First, they have to ask why should the lenders talk to them if they are current with their mortgage payments and seemingly is not yet a problem  while these bank representatives are alreadyoverloaded with their work.  The trick is the homeowners need to be honest with their situations and pay whatever they can afford.  These partial payment will stand out enough to draw lender’s attention  to response to their loan modification request.

Secondly, the homeowners has to show their sincerity of paying the workable mortgage by showing clearly their monthly income and expenses backing up with required documents such as past 2 years tax return, latest 2 months paystub, latest 2 months bank statements, hardship letter explaining why they should be allowed to pay a lower payment.

Each bank/lender has their own way of evaluation of homeowner’s situation but common sense always count.  If you think the lenders working with you will benefit them more, they probably will approve the loan modification.

Recently, my client referred me her best friend Mary who is a first time homebuyer.  She purchased her home in 2005 at Visitacion Valley, San Francisco with negative amortization loan.  As most people know it means that her loan is getting bigger and bigger as more interests are added on the principal.  In 2007, she successfully refinanced her home home into a 30 years fixed rate loan with stated income program.  However, stated really means stated and the income is exaggerated or the income had not actually reported to the IRS.  Economy changed, jobs lost and Mary could not afford to pay.  Sounds familiar.  Will this mean Mary should not try to seek help from the loan modification program because they may investigate her original loan and prosecute her fraud in the first place?

Not necessary.  As Mary is still staying at her only home with 5 more family members and she used to have excellent credits and had tried her best to pay mortgage in full and on time until 2 months ago.  She should still try to get a lower interest rate loan with a longer repayment period so that she can afford.  When economy gets better, she and her other family members can get back to work.

I am currently helping her to fill up all the form and make a income and expense balance sheet to the lenders and the result may come up in a few weeks.  If you are interested in this story, follow my blog.