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Qualifying

About Mortgage Modification

To qualify for modification you need to show that you are financially stressed. You should either be behind on your mortgage or likely to get behind due to financial circumstances.

The wisdom in the industry is that having an ARM loan with a high index and margin, on which the interest rate and payment could skyrocket, is a factor which would indicate that a hardship is building and therefore grounds for modification.

Conversely, you need to show you can keep up with your mortgage payments if your mortgage is modified. It is an unfortunate side of modification that there is no help for the person whose income has dropped so much that he lacks sufficient income to support even reduced payments.

Unemployment income can be counted as income provided your account has significant remaining eligibility and your state fund is strong.

I have convinced lenders to count as income a commitment from relatives who agree to subsidize payments through rent, gifts, or loans, despite the fact that such income cannot be used to qualify for a purchase in the first place or for a regular refinance. Rent paid by an unmarried partner who is not a co-owner of the property can be counted, in fact all of the partner’s income can be counted if the partner signs a statement that he or she is vouching for the loan. This commitment does not get recorded and does not create liability in the regular sense, nor does this cause payment or non-payment by the partner to be reported to credit reporting agencies.

Credit score is irrelevant. You do not need to have equity in your home. However, if you have too much equity in your home, and the lender could recover more money by foreclosing, the lender is not required to cooperate at all.

The lender is not obligated to modify your loan if you have substantial equity in your property. If the lender would do better by foreclosing than by modifying, the lender can foreclose. This sounds unfair, but that’s the way it is. A comparison is made using a Net Present Value test, referred to by its initials, NPV. This is why it is important to obtain a Broker Opinion of Value.

A lender is obligated to consider your modification proposal if it is one of the 30 or so which have signed an agreement to cooperate with the Making Home Affordable Program, frequently referred to as the HAMP program. Click here for a list of lenders who are part of the HAMP program.

But it’s not that simple. a lender who is on the HAMP list might not be the owner of the mortgage. If the actual owner of the mortgage has not agreed to be a part of the HAMP program, then that lender can turn the modification down.

Lenders who accepted government Troubled Asset Relief Program TARP money are required to cooperate with the HAMP program.

If you are self-employed, you will not always be required to prove your income on a fully documented basis. Most lenders will accept an unaudited profit and loss statement. Although the self-employed will have to produce their bank statements both personal and business for the past six months along with the last two years of personal and business tax returns.

The lenders’ changing financial situation, new federal regulations and new laws, whether the economy declines more or less, all make it impossible to give any exact guarantee as to what we can negotiate for you. The situation is too fluid for that. I can guarantee you that I will use all the experience and creativity at my disposal to negotiate the best possible modification for you.

You may call us at 425-771-1110. You may fax us at 425-776-8081. You may click here to send us an e-mail.

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