Friday, May 22, 2009

New loan modification, short sale options available

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Some homeowners are getting a second chance at a mortgage modification and others may now be able to make a short sale work for them. Both possibilities could stave off foreclosure.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Now, mortgage modifications can include second mortgages -- not just first mortgages -- and cash incentives are sweetening short sale deals, thanks to new efforts by the Obama Administration.

The new efforts give some homeowners a second shot at a home-saving loan modification, especially if they were originally turned down -- or turned off -- because the second mortgage (piggy back, home equity loan or line of credit, etc.) impeded the process.

Other homeowners may now be able to take the short sale escape route from unaffordable mortgages that could otherwise wind up in foreclosure.

Second mortgage modifications

Under Making Home Affordable's new second-lien program, borrowers whose first mortgages are modified will automatically have payments reduced on their second mortgages as well, provided the first and second-mortgage lender participates in the program.

Twelve mortgage servicers currently do. Among them are large banks including, Bank of America, Wells Fargo, Countrywide, Citibank, Chase and others.

Eligible homeowners looking to modify their first mortgage must be an owner-occupant of the home; have an unpaid principal balance that is no more than $729,750; have a loan that was originated on or before January 1, 2009; have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31 percent of their gross monthly income; and have a mortgage payment that is not affordable, perhaps because of a significant change in income or expenses.

For the second mortgage, in addition to lowering the payment, lenders can also opt to erase a borrower's second mortgage in exchange for a lump-sum payment from the government.

New short sale incentives

Short sale incentives were among recent refinements to the Obama administration's housing rescue programs.

In a short sale the lender closes the mortgage in return for whatever sale price the homeowner can net. However, the difference is sometimes considered income for which the selling homeowner is taxed.

Under the new short sale incentive, lenders can receive a $1,000 payment from the U.S. Treasury for allowing the owner to sell the house for less than the amount owed on the mortgage and accepting the proceeds as full repayment, rather than a short sale.

Lenders can also receive $1,000 for accepting a deed-in-lieu transaction, in which the deed is simply transferred to the lender instead of going through a costly foreclosure.

Homeowners who agree to short sales or deed-in-lieu deals can receive up to $1,500 in closing costs. To help stop second mortgages from blocking the deal, the Treasury will pay second lien holders up to $1,000 to relinquish their claims in such transactions.

To learn more about these options visit MakingHomeAffordable.gov

See DeadlineNews.Com's complete coverage of loan modifications and short sales.




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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!



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1 comment:

marvin said...

Loan Modification Help is very important nowadays for those homeowners that are trying their best to keep their own homes. There are lots of companies today that offer great loan modification packages for them to apply to.