Bail Out Bill ? Loan modification efforts - Part one

Here is the exact text out of the bail out bill.  Pay attention to the word“may” and place extra emphasis on it.

Sec 109 – Foreclosure Mitigation Efforts

Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.

My interpretation of this secition of the bill is that it encourages lenders to work with homeowners to prevent foreclosure by encouraging loan modifications.  My experience has been that if you had a major loss in income and could not make your mortgage payments and now you have regained a large portion of your income and can reasonably make your payments, most lenders will work with you to modify your loan.  This typically means they will add the past loan payments onto the balance of your loan thus taking you out of default.  If you have an adjustable rate loan chances are good that they will fix your loan rate for a period of time.  I am hearing for 5 years. Do not expect them to waive any part of your loan.  I ahve not seen that in this area.  If you have by all means let me know.  If your income does not allow you to make a large portion of your mortgage payment then the next best option is to attempt a short. That would be selling for les than what you owe on the property (assuming of course the market value supports this).

Posted by DarrinJ at 11/26/2008 2:24:00 AM
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