How a Mortgage Modification Works – What Is HAFA?
Home Affordable Foreclosure Alternatives Program
While almost everyone has heard of the Mortgage Modification Plan by now, it is still being adjusted and improved. It is in effect until December 31, 2012, and it is estimated that 3-4 million people will obtain a loan modification before the program ends.
At the one-year point, the administration announced that over a million people had received modified loans to save over $500.00 a month on their house payments. However, it has become apparent to the administrators of the program that not everyone can complete a loan modification, even if they are eligible to apply. There was a need for assistance to help these homeowners extricate themselves from a bad situation. That is the motivation for the development of HAFA, the Home Affordable Foreclosure Alternatives Program.
This program took effect in April 2010, and it is funded from the TARP money that also funds the Mortgage Modification Plan. Lenders, who are participating in the government program for modifications, must also participate in the HAFA program. It is not optional, and this makes it better for the homeowners who need assistance.
Homeowners now must be considered for eligibility for HAFA within 30 days that a loan modification is deemed impossible. There are short sale options where the homeowner sells the home, and the lender agrees to accept the sales price as a total payoff with no other obligation. A deed-in-lieu foreclosure is also one of the options with HAFA. This is a scenario where the homeowner turns over the deed to the lender and there are no further payments or obligations required. Often, the lender will require the owner to list the home for sale before a deed-in-lieu arrangement is worked out.
If you are unable to complete a reworked loan through the Mortgage Modification Plan, you may still be able to get some assistance through the Home Affordable Foreclosure Alternatives Program. There is even funding to help homeowners with moving expenses associated with finding more affordable housing.
Many homeowners are hearing about new mortgage modification options yet have no idea what a mortgage modification is. Here is the basics of what modifying a mortgage means. Use this information to help figure out and research if a mortgage modification can benefit you.
With so many homeowners looking to take advantage of the low interest rates available today, and so many more looking for a way to save money and prevent their home from being lost, mortgage modification is a hot topic. Simply put, a mortgage modification is when the terms, conditions, interest rates, length, or other factors of your current home loan are changed. This is different from refinancing because of the fact the loan remains the same, and a new one is not being taken out to pay the existing loan.
Especially these days, many home loan modifications are needed, and approved, on the basis that the homeowner is unable to pay their mortgage at the current monthly amount it is at. Mortgage lenders and banks are not eager to approve homeowners for a home loan modification and often require the homeowner to be in some sort of financial hardship in order to get approved. If financial hardship is the reason for a mortgage modification, a letter stating your problems, solutions, and that will convince them that saving your home is truly a big deal for you.
When a homeowner finally gets a mortgage modification approval, many different things can change in their home loan. Since people are usually looking to get a lower monthly payment, the home loan is extended in length. Sometimes, lower interest rates, can actually be gotten through modification of a mortgage. This is especially true for homeowners with decent credit, but who bought a home years ago when interest rates were nearly double what they are now. The end result more often than not though results in lower monthly payments for the homeowner. This comes at the expense of a longer home loan length, but can also get you better interest rates that can save you money in the long term. Also, never forget that there are costs associated with getting a mortgage modification that can easily add up to thousands of dollars that needs to be paid upfront.
While mortgage refinancing and modification seem like nearly identical practices, they are not. This information can help people who are looking into whether or not a mortgage modification is a good option for them. While all homeowners situations are different, the types of loans are all the same. However, some people will not be able to qualify for the type of loan or mortgage type they want, and need to know about their other options, and a mortgage modification is one of them.
If you are trying to reduce your monthly expenses, then debt consolidation and/or debt settlement are each excellent methods of reducing your unsecured debt payments. But getting a mortgage modification can also reduce your mortgage payment. Since your mortgage is likely the highest monthly payment, it only makes sense to have it reduced too. This is extremely easily accomplished with a mortgage Modification.
A mortgage modification is when your mortgage servicer or lender lessens the loan payment by reducing your interest rate, lowering the balance, and/or extending the term of the loan. A mortgage modification can greatly reduce your mortgage payment and has helped 10,000′s of homeowners stop foreclosure. This process can not only reduce your monthly payment, but it can take a home you were once upside down in, and reduce the payoff amount to bring it back to 100% LTV (Loan To Value). This allows you to keep the home at an affordable payment and you will no longer be overpaying for your home.
Even though most mortgage servicers will require you to be delinquent prior to granting a loan modification, it’s not necessary. When you are not behind on your loan payments, a mortgage modification is possible, as long as you can provide proof of a hardship. The hardship will show that reducing the monthly payment is necessary; otherwise the payments will not be made in the future. Although it will require a lot of time and negotiation with your lender, If you can prove these facts, the modification can be approved.
If you are trying to stop foreclosure, or if you want to get a mortgage modification, you need to begin by contacting your lender or mortgage servicer and asking for assistance. Depending on your circumstances, you may have a loan modification granted on your own, by simply speaking with your servicer. But most of the time, you will have to hire a professional negotiator to work on your case. By employing a professional mortgage negotiator, you will know that your loan modification has the best chance of success.
Remember this advice when attempting to get a mortgage modification:
1. Always send your lender a complete loan mod package; incomplete documentation is the number one reason loan modifications are rejected.
2. Don’t waste any time! Although loan modifications can happen in a few weeks, the average time is more like 2-4 months. Take action immediately, so you have plenty of time.
3. If a customer service agent at your servicer is not any help, try calling back later to talk to a new agent. Different agents may provide more assistance and be more helpful to your cause.
4. Never act rude or yell at a customer service agent at your lender. You will need their help you get your modification approved, so be as patient and polite as possible.
5. Follow up on a regular basis and make sure all faxes and communications are added to your file. We recommend contacting your servicer/lender on a weekly, if not daily basis to make sure they have everything they need to get your case approved.
If your family has faced a hardship that has reduced your income or may cause you to face foreclosure, then a loan modification will help. Take action immediately by contacting your lender to begin your modification.
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