Citi Bank Said I Qualify For Loan Modification, Can I Ask For Reduced Interest Rate?

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Citi Bank Said I Qualify For Loan Modification, Can I Ask For Reduced Interest Rate?

by Bob

Citi Bank has the mortgage on my home. The value of the property is about $400,000 and the balance is about $216,000.

I missed the last payment only and will make a partial payment in a few days so I will be late for the first time on the balance of the payment.

I will be able to make $1,000 of a $2,816 payment. That is what I will likely be able to afford from here on out.

The loan is a 15 year loan and is about 3 years into the loan. I always paid 400 to 600 extra each month for over 2 years.

The loan started at $274,000. I would like to reduce the interest 1% from 5.625% to 4.625% and make the loan a 30 year loan with payments close to $1,000 per month. I believe that way the bank will still make money from my loan and I will be able to make the payments.

My income changed from about $7,000 per month as of May of 2009 to about $3,500 per month. I have been making the payments work with savings up until now. I am almost flat on savings now. My job seems to be secure and the income will likely continue in that amount for the foreseeable future.

Do I have a specific course I should follow or are there any bumps in the road you may be able to warn me of?

Mortgage Loan Modification Answer:

by Loan Modification Expert - Dan North

First hold onto the $1,000 partial payment as they will only want a full payment. Don't spend the money but hold onto it so you can make your modified payment once arranged.

My first advice is find out if your mortgage with Citi Bank is a Government owned or guaranteed loan:

Is your Mortgage owned or guaranteed by Freddie Mac

Is your Mortgage owned or guaranteed by Fannie Mae

If you have an FHA or VA loan you most likely would know that information but if you are not sure the easiest way to find out is ask Citi Bank by calling the number on your mortgage statement.

If your loan is Government owned or guaranteed they have little choice in following the Making Home Affordable Guidelines.

Here Is What You Will Qualify For Under The Making Home Affordable Modification Program

Yes you do qualify for HAMP with the information you provided. A 50% reduction in income is a valid hardship. The HAMP program targets reducing your mortgage payment to 31% of your gross monthly income. Which would be $1085 with a $3500 gross monthly income.

The Citi Bank will first lower the interest rate to 2% then extending the length of the loan to lower your mortgage payment to $1085. If you do not already have escrow payments for property tax and home owner's insurance that will be set up. The $1085 monthly payment will also include the escrow payment in that amount.

Following the guidelines your interest rate will be 2% for 5 years then increasing 1% a year to about 5% currently. You can ask your Loss Mitigation Officer to modify the loan outside of the HAMP Program on the terms you said you wanted as above and yes Citi Bank would make more money on that arrangement. They may just approve that arrangement without doing the Making Home Affordable Program. Citi Bank may have policy on only doing HAMP Modifications so you will have to specifically ask them to not do the HAMP Program to just reduce the interest rate 1% and extend the loan to 30 years.

Here Is What You Pay Reducing The Interest 1% and Extending The Loan To 30 Years

That would make your monthly mortgage payment about $1,400 if your monthly insurance payment is $58 and monthly property tax is $166.67 your Principal and Interest payment would be $1,168.51 figuring 27 more years to pay off the loan. (I am guessing about $2,000 a year in property tax and $700 a year in home owner's insurance)

To hit the $1,000 payment you will need to do the Making Home Affordable Modification Program. Even extending the loan to 40 years will only bring down the payment to about $1,200

Here is a mortgage payment calculator so you can play with numbers to see what you would have to ask for.

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Citi Bank Said I Qualify For Loan Modification, Can I Ask For Reduced Interest Rate?

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Loan Modification Help!
by: Anonymous

Why refinance and pay fees which will add to your loan balance, when you can get a loan modification for free? With a loan modification there are no closing costs, you can lower your rate to 2%, you don't need any equity in your home, you could get a principal reduction, your credit score has nothing to do with qualifying for a loan modification, bankruptcy does not matter, foreclosure does not matter, and you can apply yourself and structure the loan modification to give you the lowest possible payment.

Learn how to apply for a loan modification and structure it to give you the best deal: There is a workbook called "60-minute Loan Modification Workbook" that will show you how you can apply and structure your loan modification. good luck!

Mortgage Loan Modification Answer:

by Mortgage Loan Modification Expert - Dan North

I fully agree on the book you mention. The workbook you refer to is one that I highly recommend.

As far as "why refinance" that is real simple, look at the rates today. This is the time to refinance if you can qualify. The benefits are that you can preserve your credit rating while lowering your rates. That is a very important issue to many people. The Key is if you can qualify.

If you are upsidedown, have already missed payments or suffered hits to your credit rating you are not going to qualify for standard refinancing.

You can refinance through Making Home Affordable Refinance Program if your LTV (loan-to-value) is 125% or below and you are not delinquent. Per the HAMP guidelines you will be evaluated for HARP automatically before you are evaluated for HAMP modification.

That limits the field quite a bit and most will not have a refinance option so can only resort to mortgage loan modification.

The Loan Modifiction Book referenced above is a very good do-it-yourself kit to walk you through your loan m odification.

I recommend it highly!

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Debt-to-Income Dilemma
by: Anonymous

I'm also with Citi - though with a much lower principle. I am trying (now one-year PLUS) to get a HAMP or in-house modification at a lower rate.

I am also self-employed, but am constantly getting mixed responses with the Debt-to-Income calculations.

Traditionally, it seems they are using DTI based on your GROSS monthly income. Does this change when self-employed? ...the issue with my situation is that I am a sole proprietor, service-oriented business. I therefore have complete control over the "cost" decisions on a monthly basis - meaning any "adjusted gross income" could be increased based on what I decide to spend for the business each month. (The only costs that are standard are travel costs - which is basically gas.) So, would I be able to convince my lender that, tho self-employed, I should still be using my GROSS monthly income for DTI calculations?

Also, are the In-House modifications more flexible (meaning not bound strictly by the 31% rule)?

Also, what is the "62% rule"? Does that mean that housing costs (31%) plus other debt should NOT go over 62%? If that's the case, THEN WHAT?

Mortgage Loan Modification Answer:

By Mortgage Loan Modification Expert - Dan North

Unless your DTI is very high it is not a big issue. On the HAMP program if after a modification your ratio is 55% or higher you are still elligible but must take credit counseling. If your total monthly debt and expenses are above 62% even after a modification then you do have a financial situation that will likely result in a re-default on your mortgage.

What you really need to do is lower your DTI by whatever means possible. If you can lower your cost of doing business and still make the same gross income why wouldn't you do that anyway? That would be a start on increasing your income. Normally that is something that can be put off for a short period but generally will have to be spent or suffer income loss, so normally is not a solution.

Yes, when self employed the answers is to make more income and increase the profits. Perhaps there is something you can do there and should.

If you have extensive unsecured debt bankruptcy may be something to look into but it can also mean going out of business for yourself. Debt restructuring may be an option but you will take a hit in credit for a short period of time and that could be a problem if you depend on credit for your business. Look into car loan modification, lowering homeowner's insurance, selling the boat and lowering other monthly expenses etc....

In-house modifications are not restricted by the HAMP guidelines and there is some more flexibility, but if you can not afford your home Citi will not modify and will expect you to short sell or execute a DIL (deed-in-lieu of foreclosure).

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Citi Bank Said I Qualify For Loan Modification, Can I Ask For Reduced Interest Rate?