How Can We Find Out If We Are Elligible To Lower Our Monthly Mortgage Payment

by Beth
(USA)

I appreciated reading some of your articles, very informative and easy for the non-banking person to understand, thank you.

Could you please email me the mortgage questionnaire form for the TARP Mortgage Reduction program...? Can we figure out if we
qualify ourselves by filling this form out rather than sending it to someone we don't know?

I know the balance on our home loans, but not the current value other than it has dropped.

We are on a 20 yr loan, 5.625%, and although we'd be able to pay the home off sooner, the monthly payment with taxes and insurance is strapping us for cash.

Our payments have been on time. Excellent credit scores.

I'm no longer working, but that was a personal choice. My job was stressful as too is my husband's, and our health was significantly suffering. We are managing on one salary, but
again it is tight. I heard we might be eligible for this program to reduce our monthly payment.

Probably more information than you need to know. I can't believe I'm telling a stranger this information, but I'm taking it on face value - reading your articles that you are a legitimate, ethical individual, who wants to help. So, I'm just looking for advice. I will call our current mortgage lender Friday.

With appreciation,
Beth

Mortgage Loan Modification Answer:

by Loan Modification Expert - Dan North

Hi Beth,

Thank you for the vote of confidence. I totally understand your concerns so will give you two options, first you can have me figure out your options for you and second the general information so you can figure out your options on your own.

First option go to my website, fill out the on-line form here: Hardship Loan Modification Pre-Qualification Form Get an analysis of your mortgage with a side checked by our negotiation team to see what you qualify for and what your lender will negotiate under the Government Mortgage Assistance Programs or in-house Lender Programs.

Simplified Making Home Affordable directions so that you can figure out what your options are on your own:

The target monthly payment for the Making Home Affordable programs is 31% of your monthly gross income (monthly gross income amount X .31). You can take the gross income figure off last years tax return (just divide by 12) or you pay check.

31% of monthly gross income is the cap on what your monthly 1st mortgage payment should be; principal, interest, property tax, home owner hazard insurance and your monthly mortgage insurance - FHA mortgage insurance or PMI, private mortgage insurance, if you have it - (you may pay any or all as part of your escrow payment, sometimes called an impound payment, that amount is included in the 31%) if you have a home owners association fee or condo association fee this is also included in the 31%.

That will give you the ball park on what you can lower your payments to on your 1st. Per the guidelines to reach that amount they have to lower the interest rate to as low as 2% and then extend the length of the loan to reach that 31% figure.

After that it goes to a forbearance on the principal balance. They will reduce the amount of the balance that you are paying on, you will still owe that balance, but it is now interest free either for a number of years or till the end of the loan at which point it would have to be paid. The amount the balance is reduced is determined by what needs to be done to arrive at 31% of your gross income.

The 2nd is handled separately and is usually based on what is done to modify the 1st. The Government Program is called the 2nd Lien Program and interest rate is set for an amortizing loan and a different percent for an interest only loan:

Interest Only 2nd Mortgage: The interest rate is lowered to 2% for 5 years then increased in steps to the cap set at the modified interest of your 1st mortgage. If you had any principal forbearance or reduction on modifying your 1st mortgage your 2nd mortgage principal is reduced by the same ratio as the reduction or forbearance on your 1st.

Amortizing 2nd Mortgage: The interest rate is lowered to 1% for 5 years then increased in steps to the cap set at the modified interest of your 1st mortgage. If you had any principal forbearance or reduction on modifying your 1st mortgage your 2nd mortgage principal is reduced by the same ratio as the reduction or forbearance on your 1st.

The expense and other debt information is for figuring out if you can afford the modified payment. You will have to document and prove to the lender you can afford the modified payment.

That information will have to be supplied to the lender when you submit your modification request.

With all that data you can come up with a strategy for submitting to the lender and how to negotiate what you need and want. Part of that is what you ask for and how you structure what you are asking for so that they can approve the modification.

Do you have a Fannie Mae or Freddie Mac loan? Is your mortgage an FHA loan?

Here are some links to find out if your loan is Government owned or guaranteed. Does Fannie Mae Own your loan? Does Freddie Mac own your loan? If either own your loan your lender is required to follow the HAMP guidelines. If the loan is FHA the guidelines are slightly different but the 31% is the same and it is also mandatory.

You can play with those numbers and if you have questions I can help or go ahead and send me the information and I will run the info through the data base and see what we can come up with.

Here is a calculator that you can use to work out various options to see how your payments will change: