Bank Modifiction

Bank Loss Prevention The most common benefit to the homeowner is the prevention of foreclosure because loss prevention works to either relieve the homeowner of the mortgage obligation or create a mortgage resolution that is financially sustainable for the homeowner. Lenders benefit by mitigating the losses they would incur through foreclosing on the homeowner. Immediate foreclosure creates a tremendous financial burden on the lender. Loss prevention allows the lender to take a lesser loss right now in order to avoid the much greater losses caused by such foreclosures. Loss Prevention - History and Causes Loss prevention in banking and credit markets has been around for decades, but has experienced a resurgence since 2008. This rebirth has been a response to the dramatic increase in foreclosures nationwide. These foreclosures have been caused primarily by a stagnant economy, a decrease in home values, the credit crunch and the subprime mortgage crisis. In late 2008 the mortgage industry nearly collapsed. Large numbers of lenders went out of business and the rest were forced to eliminate all of the loan programs that were most prone to foreclosure. The elimination of these programs produced what is now referred to as the "credit crunch". Faced with mounting losses from foreclosures lenders were forced to tighten lending guidelines. This means people that were able to previously qualify for loans are now unable to do so. Many of these people are in risky option arm, adjustable rate and negative amortization loans that prone to dramatic payment increases; without the ability to refinance out of these loans the only answer for many is foreclosure or loss prevention. The decrease in home values created a market with fewer qualified borrowers than homes for sale. When there is less demand the prices drop. This has lead to a real loss of equity for every homeowner in the country. With less equity homeowners are less likely to qualify for a loan that will refinance them out of a risky loan; with less equity less homeowners are able to qualify for home equity line of credits or a second mortgage in order to pay for financial emergencies. For many homeowners the loss of equity has been extreme enough to cause negative equity. Negative equity is when the home is worth less than the amount owed by the homeowner. This has created a situation for homeowners wherein their home, which was previously their most valuable asset, is no longer an asset at all. Such homeowners are more and more frequently 'walking away' from their mortgage obligations and letting the home go into foreclosure. Loss Prevention Options Loss prevention in simple terms is a range of options that lenders utilize to "Reduce" their potential losses on a loan. Reduce is a term that means to minimize. Whenever a homeowner becomes past due or defaults on their mortgage payments the collection process starts to kick in. When a homeowner's payment status becomes increasingly past due, such as 30, 60, 90 days past due then various collection methods are triggered. This can range from letters, phone calls, field visits to your home, attorney letters, notice of defaults, and even the foreclosure process itself. What you should understand is that the lender does not want to foreclose on your home! Foreclosing on the home for the lender means losses for them. How do they incur these costs? They come from collection costs, attorney costs, foreclosure costs, filing costs, repair costs, home sales costs, interest costs, and lost opportunity costs. The last thing a lender wants to do is foreclose on your home! Do not misunderstand; some lenders may take a different view than others, but most want to work with you. For some lenders it is not always a common sense approach. That is where our experience helps you negotiate the best deal by utilizing proven techniques. Loan Modification This is probably the largest category of loss prevention options. They range from deferral of payments, extending loan maturities, converting adjustable rate mortgages into fixed rate mortgages or full indexed rates, fully amortizing adjustable rate mortgages, capitalizing delinquent amounts. The best scenario for the lender and yourself is a solution that will provide a long term resolution to the problem. Other strategies include reducing or forgiving your principal. In the past, this resulted in the homeowner paying taxes on the reduced amount. However, recent legislation has temporarily suspended this tax burden. At Service One, we will take a standard industry application known as a Freddie Mac form 1126. We want to provide the lender with the best information possible to represent your case properly. At Service One, we utilize trained, licensed real estate professionals that understand the requirements of the lenders we work with. Short Refinance This is a process whereby a lender reduces the principal balance of a homeowner's mortgage in order to permit the homeowner to refinance with a new lender. The reduction in principal is designed to meet the Loan-to-value guidelines of the new lender (which makes refinancing possible). Forensic Document Analysis This is a thorough review of your loan documents by our experts to insure that all Federal and State compliance laws have been adhered to. There are typically over one hundred pages of loan documents in a standard closing. This can be an extremely effective method in negotiations, especially if some defect is discovered. This is used as a last resort for a lender that does not want to cooperate when there is a viable hardship case. Imminent Hardship This is a hardship that will be created by a change in terms of the loan. For example, an increase in the rate for an adjustable rate mortgage will cause payments to go up when the homeowner is already tight on their budget. Most lenders recognize the need to modify the terms and even lower the rate on these cases. Many customers are struggling to meet their mortgage obligations and have exhausted all of their reserves to only come to the end of what appears to be a lost cause. That is not the case if you can thoroughly document your situation to the lender. Short Sale Short sale is when the lender agrees to accept an offer on your property from another qualified buyer for an amount that is less than the current principal on your existing mortgage. This can be a viable alternative for several reasons. Sometimes lenders refuse to negotiate because your resolution does not represent a permanent solution. The lender will only look at offers where the borrower has already been qualified for a loan. The amount they decide to accept on the short sale is a matter of economics. What do they stand to lose, what will the market bring if we have to foreclose and sell it ourselves? They already have worksheets that will tell them what their bottom dollar is for the property! At Service One we provide the lender with the market data upfront so that they are not wasting their time on a worthless offer. Lenders want you to help make their job easy, but they are not fooled by bogus information either! If you are local, we will have a member of our Network of local realtors help you with the sale. If you are out of town, we will contact a realtor on your behalf with your approval. Click Here to View Laws by State Deed in Lieu Of Foreclosure This technique is an offer to the lender to accept the title to the property back in return for satisfying your obligation on the mortgage. This is not recommended without the consultation of an attorney to insure that the deed is properly prepared and that there will be no deficiency pursued against the homeowner. We have an on staff attorney that will make sure that everything is handled appropriately. If you decide not to do business with Service One DO NOT sign a deed in lieu of foreclosure without attorney representation and review. Cash For Keys Negotiation This is a variation of the deed in lieu of foreclosure. The difference is that the lender will actually pay the homeowner to vacate the home in a timely fashion without destroying the property. The lender does this to avoid incurring the additional expenses involved in evicting such homeowners.