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Loan Modificatons-A Solution For Your Non Performing Mortgage?

Mar 16, 2009 Real Estate Properties

Loan modifications, specifically principal write-downs will be the answer to many people’s mortgage needs.

An interesting solution.

The Solution For Negative Equity - Loan Modifications

The FHA insurance package which will insure $300B of new mortgages for borrowers that are in “negative equity” positions is part of the Hope for Homeowners initiative which was passed by Congress in July.

Negative equity, meaning that most of these properties are worth less than the balance of the loans.

Well, the borrower has to qualify for the loan modification with a 31% or lower DTI ratio, at least 6 payments made and none of them late.

What happens if the borrowers meet all the guidelines? (And keep in my mind, that most of these are non-performing mortgages. And if I had to guess what the debt to income ratio on average in 2007 was, it would most likely be around 40-45%).

Loan Modifications - Who Qualifies?

The answer is: Very few people.

When the program became available, out of 49 people applying, zero applications were approved.

NonPerforming Mortgages Included In FHA Secure Program

The FHA Secure program had a total of 203 applicants. Out of that number on 49 applications were approved.

In California around the same time, a Notice of Default was filed on about 1,300 homes.

If the H4H program needs more time, can’t we just wait?

Yes.

Just keep in mind that if lenders are going to participate in these 90% principle reduction loan modifications, they will be looking for federal backing. H4H included.

So, while everyone’s waiting for the good news on H4H to come out, why not get your wallets out and make an offer on those 49 notes that were just turned down?

There will be a whole lot more non-performing mortgages (to buy) where those come from.

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