I found a great article posted in the Bakersfield Californian… Reverse mortgages an option for some.

Many folks think reverse mortgages are junk loans pushed on seniors by bottom feeding mortgage lenders. And many cases that may be. That’s why you need to be educated on reverse mortgages and be sure to work with a trustworthy lender.

As started in the article, some misconceptions on what reverse mortgages are and how they work…

“I will lose my home to the bank.” “If I die my children will not get my home.” “At some point I will outlive the mortgage and have to leave my home.” Thankfully, none of these statements are true. — TONYA HOWZE, Contributing writer, Bakersfield Californian… Read the rest of Reverse mortgages an option for some

Reverse mortgages might really be a good option for some home owners. I recommend you check the aforementioned  article if you are considering a reverse mortgage.

For a little different explanation of reverse mortgages as well as other mortgage types.. visit our Real Estate FAQ article – Common Mortgages in Tehachapi CA.

I recently came across an article via the Realty Times entitled, “How Long Does a Loan Modification Take?” by Ralph Roberts.  In the article, he states that a typical time frame for a loan modification is 30-90 days.

How long will it take? The loan modification process typically takes 30 to 90 days, depending mostly on your lender and your ability to efficiently work through the process with your attorney or other loan modification representative.

Back in October of 2007 we called our lender to inquire about loan modification as our interest rate sky rocketed to 9.4%. We held on doing the refinance as we were trying to sell the property. We missed our window and wound up with a mortgage payment that went from $1400 to almost $2200. 

Our loan was with Litton Loans and they stated to us the process would take 45 – 60 days. We turn in all the paperwork needed and we don’t hear back from them for almost a month.. we had top call them. It took us a week to reach someone.  The story goes on and gets worse but I’ll spare the details. In the end our home loan modification process took over 120 days. Something we started in October didn’t finish until February 2008.

Beware that if you are working with your lender on a loan modification, you have to stay on top of them almost every day. And if your lender is Litton.. good lock and God bless.  For some helpful tips on  loan modification check out this article that we posted a while back, How to Restructure or Modify an Existing Loan.

In today’s real estate market we are seeing a significant amount of short sales and bank-owned properties listed. How does one know whether they should attempt a short sale or simply foreclose? Here is some information about the process of a short sale and how a short sale vs. a foreclosure affects your credit.

Short Sales
The term ‘short sale’ is a bit misleading because they aren’t always short. In a short sale, everything depends on the loan company. The first step to starting a short sale is to contact a real estate agent. In my personal opinion, I would choose a realtor with at least 10 years experience to ensure they are knowledgable and will be able to handle a short sale.

The real estate agent will then determine a value for the home that is below market value so that the house will hopefully be sold quickly. This value is going to be less than the amount owed on the loan so when an offer is made, that offer is then sent to the loan company with a packet. Then the loan company decides whether they will accept it or not. If there are two mortgages on the home, a short sale can be more difficult because the second mortgage company may not get any money, therefore they may not agree to any terms. But, you do not have to be delinquent on payments to have a short sale approved.

Often times, the loan company will absorb a lot of time deciding on whether to accept an offer, sometimes up to three months. This means the buyer needs to be committed and really want the property. If the offer is accepted and escrow is completed you will be relieved of your debt in most cases and about 100 points will be deducted from your credit score.

Foreclosures
A foreclosure happens when a homeowner defaults on their mortgage. The loan company sends a letter of default and notifys the occupants that the house will enter into foreclosure. A house can still be up for a short sale during the foreclosure process and if the bank accepts the offer foreclosure will be stopped.

Foreclosure damages a credit score by about 250 points. Foreclosure is absolutely something a homeowner wants to avoid if they intend to use their credit in the next 5-7 years.

With the rate of foreclosures and homeowners defaulting on their mortgages, most lenders are willing to help consumers keep their current home loan by modifying the existing loan to a new interest rate.

By modifying an existing loan, the homeowner is able to stay in the home with a new, lower payment than what the adjustable rate loan was offering. Modifying an existing loan requires time on the part of the consumer but is often much less expensive than refinancing and in cases where a refinance is not possible due to loan to value ratio, loan modification may be the only option besides a foreclosure or short sale.

Here are tips on getting an existing loan modified:

1. Call the customer service department of the loan company, not the billing department. The billing department is interested only in collecting money, the customer service department will probably be more courteous.

2. Explain to the representative that you are current on your payments but you won’t be able to stay in the house at the current rate. You want to stay in it but you’ll need to give the house back. Then let them talk. They should offer to qualify you for a loan restructure or modification.

3. If they do offer you a loan modification you will be sent to the loss mitigation or loan retention department. You will be set up with a representative and will be asked to send in financial information. They want to make sure that you can actually afford the house and that you didn’t get into a house that was just way over your head. When they determine that you can actually afford the house then they will draw up new loan documents.

4. Now at this time you may need to be the squeaky wheel. If you aren’t getting a response back from them on the approval of a loan modification you should call at least once a week. Time is of the essence for you.

5. Loan modifications typically take 45-60 days. Even if the loan company is overloaded with restructuring loans it should still be handled in a timely manner, that is why phone calls must be made to check the progress of your account.

6. When you receive the loan documents you will probably be asked to pay some legal fees and have the documents notarized. You then send them back and hope everything goes smoothly. Once again, keep in contact with the loan company because they are dealing with thousands of accounts, yours is just another number.

7. Sometimes mathematical errors are caught when the modified loan goes through underwriting. This will slow the process and possibly cause them to ask you to get more papers notarized. In most cases this won’t be necessary if it is a document without a signature. Ask them if they can just send that one or two pieces of paperwork and you will sign them so you don’t have to get the entire stack notarized again.

8. Be sure to really go over the math with your new loan. Often times the loan company will tell you that they will take care of one months payment for you but they just roll it into the value of the loan. You may or may not want that.

9. Make sure you ask questions. You may think they are doing you a favor but they really want to modify your loan just as bad as you want to stay in your house. Ask what kind of loan they will be proposing, will it be a 30-year fixed rate, will it go back to the interest rate before the last increase, or will they give you a new rate for two years and then adjust it again.

Loan modification or restructuring is a better option for most homeowners than foreclosure. It keeps your credit looking good and allows you to keep your family in your home.