Should I Stop Paying My BOA Mortgage If Turned Down By Bank Of America for Loan Modification?
Recently (4/13/2010), I sent in a reply to a letter sent by BOA in Dec 2009, regarding home loan help. In the letter, I explained I would be losing my Job on June 26th, and would not have the money to keep paying the current monthly Mortgage on a timely basis.
My salary will definitely see a good size cut, and at 61, it will take me some time to find another job.
I will be receiving a severance package of about 2 months, which will help during my job search, but if I get no relief from the monthly payment, the severance package will mostly be used on my mortgage.
I sent a summary of my finances showing 80% of my salary goes to my mortgage. My refinance was with country wide in 2007, in which I paid high points to get a 6% (5) year interest only plan. All payments have been on time and I am not behind.
My home is estimated around $420k to $460K, the mortgage balance is $455K (increased the past 6 months).
If Bank Of America turns me down, should I continue to pay against the mortgage knowing I will be out of funds in August and will no longer be able to pay? Or do I stop paying in July, and save my funds risking a foreclosure, while getting the banks attention on the seriousness of my situation.
Mortgage Loan Modification Answer:
by Loan Modification Expert - Dan North
If your mortgage payments are 80% of your income right now you already qualify for a loan modification under HAMP if you have a financial hardship.
If your current financial scene makes your mortgage payment affordable when you are un-employed you will qualify for temporary un-employment forbearance through Making Home Affordable. Under this program Bank Of America has several options to help you while un-employed. This would include a temporary reduction or waiving of payments for a period of time. This would not be a permanent reduction and you would most likely have a repayment plan to catch up the missed or reduced payments once you were re-employed.
Find Out If Your Mortgage Is Government Owned Or Guaranteed
First you should find out if the Government owns or quarantees your loan as this would reqiuire Bank Of America to follow the Making Home Affordable guidelines:
Is your Mortgage owned or quaranteed by Freddie MacIs your Mortgage owned or quaranteed by Fannie MaeIf 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 your lender by calling the number on your mortgage statement.
There is assistance for Unemployed Homeowners under the Making Home Affordable Program and your situation is a valid hardship as immenent default. Under these circumstances Bank Of America would most likely provide:
- Temporary Assistance for Unemployment for 3 to 6 months
- Then do a Making Home Affordable Modification to your mortgage once your new income is established
- Your missed or reduced payment amount can be added to the end of the loan to bring your mortgage current
The one requirement being that you stayed current on your payments during the forbearance for unemployment.
Should You Make Mortgage Payments
If Turned Down By Bank Of America
Bank Of America will most likely not start any forbearance arrangement until your unemployment started but it can be all arranged to stat on a specific date, namely when your employment ends.
You will then have 3 to 6 months to find re-employment. A 3 month forbearance can be done verbal over the phone and would likely have a re-evaluation at the end of 3 months whether to extend the forbearance or to start a HAMP Loan Modification. Anthing over 3 months would have to be formal and in writing as a forbearance aggreement. Your severance and eligibility for Unemployment insurance would be the main factors BOA would look at to determine how the Temporary Assistance for Unemployment would be done.
So To Answer Your Question Here Is My Advise:
- Only pay what you can afford
- Do not wipe out your retirement funds to try and stay in your home
- Do not borrow money to try and stay in your home
- Unless it is part of a deal that you can afford and you want to take but the lender is requiring a repayment to bring the loan current first.
There could be advantage in speeding up the approval process by being delinquent but you can also force yourself into a situation were you will lose your home when you may have been able to save it if you were current. If you can not afford the payment it is a mute point.
Most people do not set asside the money when they stop making mortgage payments and then do not have the money available when the lender does offer a deal if they can make the mortgage current first.(This is almost always the first deal offered by the lender and may be the last)
If you are going to lose your home no matter what you do, then you have to do what is best for your future. That means you need to work out an exit strategy for leaving your home and getting a new residence.
In your situation there are the unknowns of what your future income will be and when you will be employed again. You can find out if Bank Of America will play ball with you and get their aggreement in place before you are unemployed. If they will not that tells you something too.
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