Imagine that a household has two wage-earners who take in $100,000 per year. Lenders allow them to finance with monthly payments equal to 31 percent of their income or $2,583 per month. If $100 per month goes to property insurance and $400 a month goes for property taxes, that leaves $2,083 per month for mortgage interest and principal payments. At 5 percent interest that’s enough to borrow $388,025.

Okay, now go back to that household income. If the household income is paid out with a check on the 15th and the 30th of each month then each check is worth $4,166 — before taxes, social security and Medicare. Subtract those costs and you’re looking at roughly $3,500 twice a month.

That sounds like a lot of money, at least until you mention auto insurance, car payments, credit card debt, student loans, state income taxes in most jurisdictions, health insurance and other costs. Suddenly the monthly mortgage bill looms large.

But what if interest and principal payments could be reduced to $1,041.50 every two weeks? Not only that, the loan will be paid off several years earlier, saving more than $63,000 in lifetime interest costs. Would you be ahead?

The Bi-Weekly Diversion

With monthly payments for principal and interest we’re paying $2,083 per month for the standard 30-year mortgage. That sum, times 12 monthly payments, equals $24,996 per year.

With the bi-weekly we shell out $1041.50 per payment. A payment every two weeks means there are 26 payments per year or a total of $27,079 annually.

The reason a bi-weekly mortgage results in a shorter loan term is not because of magic, it’s because you’re paying more to reduce the loan balance each year. The result is a shorter loan term, around 25 years rather than 30. Most of the interest savings come from not having to make mortgage payments for the last five years of the mortgage.

Bi-Weekly Marketing

We all routinely receive third-party bi-weekly mortgage offers, third-party meaning not from our lenders. Such third-party companies want to set up a bi-weekly loans for us, usually for a start-up fee and a charge with each payment. And they’re willing to do this without the need for a credit report or loan application.

So what’s the problem?

1. A mortgage is a contract between a borrower and a lender.
2. The third party bi-weekly company is not your lender.
3. Because the third-party bi-weekly company is not a lender it does not need your credit report or a loan application. It has nothing at risk, no money has been advanced to you.
4. While the third-party bi-weekly company collects your money, your lender is not obligated to accept payments every two weeks.
5. In other words, the bi-weekly company collects your money and simply makes 12 larger payments.
6. The money given to a third-party bi-weekly mortgage company is money that could have gone to reduce your mortgage or other debts.
7. If you’re paid on the 15th and 30th of the month you receive 24 paychecks a year — not 26. This means your paycheck schedule differs from a bi-weekly payment plan.

But wait, isn’t the third-party company audited? Maybe, but so what. Even if a third-party company is audited the point remains that you have to make required payments to your lender every month.

How about insurance for the third-party company? Insurance to cover what? How much coverage is available? Who is the beneficiary? How long will it take to collect? And, again, so what? Your agreement to repay the loan is with your lender and no one else.

Of course, no one mentions what happens if your third-party bi-weekly helper makes your payment late — or worse, doesn’t make the payment at all. It’s your credit that will be impacted, you who will have to quickly come up with any unpaid balance and you who will face foreclosure if you don’t have the money.

Lastly, are you ahead prepaying your mortgage or is the money better spent reducing credit card balances and other debt?

The Right Way To Get Bi-Weekly Benefits

If bi-weekly mortgage payments make sense from a math and personal finance perspective why not take advantage of the concept in a way that costs nothing extra?

First, see if your loan allows prepayments in whole or in part without penalty. Most payment forms allow you to add extra principal with each payment and that’s what you need.

Second, take your current mortgage payment — the amount you pay for principal and interest — and add 8.5 percent. Make the larger payment each month. Example: If you owe $1,000 for principal and interest add $85 for additional principal. Remember that you must also pay taxes, insurance and other required costs.

Third, check your mortgage balance each month to assure the additional payment is being properly recorded.

Notice that if you do it yourself you do not have pay any additional fees or charges. No one else is touching your money but you. No more than 12 payments are being made each year so your lender is happy.

Foreclosure

You can still default and be foreclosed if you prepay your mortgage. You must make your required payment, on time and in full, each month and without exception until the debt is completely repaid. That you have made voluntary prepayments does not change your contractual obligation with the lender.

Calculators

Good bi-weekly mortgage calculators which do not require your name or other information are provided by MortgageCalc.com and BankRate.com.

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According to the Federal Trade Commission, the government has sought to ban more than a dozen marketers from selling mortgage relief and foreclosure relief services, in one instance seeking $11.4 million for contempt.

The release from the FTC follows:

As part of the agency

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Let me explain:

I have a mortgage which is set up like this: Payment is due on the 1st of the month. However, there’s a grace period. If the lender gets my payment by the 15th of the month there’s no late fee. In addition, there’s no credit ding. Why? Because only items which are at least 30 days late are included on credit reports.

In other words, this mortgage is exactly like millions of other mortgages, there’s a due date and there’s a built-in grace period. If payment is not received within the grace period then borrowers can be hit with a penalty, perhaps 5 percent of the payment amount.

A Contract Is Not A Contract

Now my lender is trying to modify my mortgage. Apparently a contract is not a contract when a lender doesn’t like the terms of the deal. This seems odd since the lender underwrote my loan after looking at roughly 20,000 pieces of paper and because the mortgage is in the “lender’s usual form” — an expression which means the loan terms are written by the lender’s lawyers to favor, well, the lender.

In the past few days, however, I have received several calls from individuals who say they are my lender. The drill goes like this: The phone rings. It’s 8:30 at night. A pleasant automated voice says I should hold. For whom am I holding? Ah, that turns out to be an alleged “representative” of my bank.

“We see you haven’t paid your mortgage yet,” says a voice on the phone. “If you’re having financial difficulties you may be eligible for help through the federal government.”

“Nope,” I say, “I’m fine.”

“Well, your payment is due on the 1st and has not been received. We can charge your checking account with an electronic transfer right now for a $20 fee and you can avoid a late payment fee.”

So what’s wrong with this call?

First, I can avoid a late fee without help from my bank. I do this by making full and timely payments every month, without exception.

Second, why am I being called? My mortgage says I can make my payment as late as the 15th of the month without any fee or penalty. It’s now the 12th.

Buried in the smooth script and the fake concern regarding my financial situation is a more troublesome issue: Someone I don’t know has called me.

If I authorize them to electronically withdraw money from my checking account I must provide certain information I know and they don’t. And once such information becomes free-range data, how can I be sure they won’t empty the entire account? I don’t actually know the caller. I hear what they’re saying but I have no way of knowing if I’m being contacted by a lender or a con artist. It’s not easy to tell the difference.

Assuming this is a call from my lender, the real effort here is to speed up my payment before it’s actually required. If the lender can scare enough people to flush out more early payments it will then have a few days of extra cash on hand to earn some additional float dollars, money which can be used to fund executive bonuses or help credit card borrowers in need of financing at 29.99 percent.

I’m sure in some sense that any payment made after the 1st is “late” but it doesn’t matter: my lender — and probably your lender — has agreed in writing not to take any action or charge any fee if my payment is received during the grace period. And after all, it was the lender who wrote the loan terms.

So check your loan documents. If you need help, speak with an attorney or legal clinic. Know your rights. If your mortgage allows a grace period then that’s the deal. Always meet the terms of your mortgage with full and timely payments. And if your lender calls early to ask where’s the payment, tell ‘em where they can look for it.

(Peter G. Miller is the author of The Quick & Dirty Guide To Successful Mortgage Modifications. Posted originally with the Huffington Post.)

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Answer: Credit scores can be seen as pictures which show your credit standing at one point in time. At any other point in time the picture may be different.

Actually, it would be amazing if credit scores did not change — that would suggest a total lack of financial activities, an unlikely situation.

What have you bought in the past month that would increase your credit debt? Have you missed a payment? Been at least 30 days late?

Or, by any chance has your credit card company reduced your credit limit? This could reduce your credit score. For instance, imagine that you owe $3,000 on a credit card with a $10,000 limit. You are using 30 percent of your available credit on that card. If the limit is reduced to $5,000 you are now using 60% of your available credit, and that higher percentage could lower your credit score.

If you’re buying a home, have a mortgage locked in and are waiting for settlement, do nothing that would change your financial picture. Why? Because just before closing the lender will again look at your credit report. If something has changed a red flag may go up. Thus, put off credit purchases until closing is finishing and the transfer of title has been added to local records.

Syndicated originally by Content That Works and posted with permission.

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Actually, it’s a very big deal.

“Unfaithfulness in the keeping of an appointment,” said Horace Mann, the great educator, “is an act of clear dishonesty. You may as well borrow a person’s money as his time.”

No one has perfect attendance, it happens that everyone at some point is late. In some fields and professions it’s a minor manner, especially if you work independently and don’t have others instantly dependent on you.

But in many work environments, being late is a big problem, one that can result in lower wages, fewer promotions and in times like these, a bright pink slip saying you’re fired.

Why is being late so important?

First, the best person in the world isn’t worth a damn if they’re not where they’re supposed to be when they’re supposed to be there. It doesn’t matter how skilled you are, how much experience you have or how well you have been educated; none of that stuff is worth anything if you’re not available.

Second, if other people depend on you — team members, subordinates or superiors — they are stuck until you get into gear. That’s noxious at best, grounds for dismal at worst. In today’s employment environment it’s not wise to aggravate other people if you can help it.

Third, being late is simply disrespectful. The message is that someone just doesn’t care, isn’t making an effort and sees little value in what they’re doing. That’s not a smart message.

Realities

Ask yourself a question: Why do some people get promoted while others don’t? Why do some people get retained while others are canned? Part of the answer is that employers look for people who are good team players, people who are reliable, interested and striving. Folks who are late don’t fit.

Being on time, in the right place and ready for work is a baseline necessity in many fields. The good news is that when you have a consistent pattern of being on time then when it does happen that you’re late — and it will happen — other people will not take offense, not feel devalued and not sense that they have been treated disrespectfully. In other words, you get points and credit when playing by the rules.

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Others in the lender community argue that it’s okay to bring the last payment to closing as long as it’s not late. This may be okay in some situations and with some lenders, but you may be more comfortable making the payment on time and in full to assure that the first lender is fully paid, that no late fees have been assessed and to be certain that no bookkeeping error results in a credit report ding.

In 2005, HUD said that when refinancing to an FHA loan “the borrower must have made all of his/her mortgage payments within the month due for the previous 12 months, i.e., no payment may have been more than 30 days late and is current for the month due.–

Mortgage interest is paid in “arrears” — in other words, a payment made April 1st is for principal and it is also for interest earned during the month of March. If closing is on April 15th additional interest will be due for use of the lender’s money during the month — but if payment was made on April 1st nothing will be “late” because payment for the additional 15 days is being made before the next due date. The settlement agent will work the numbers and take care of the pay-off.

For specifics, speak with your lender and the individual who conducts closing.

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For much of human history mortgage lenders have been vehemently opposed to loan modifications — except when it’s to their advantage. Now, however, a nationwide foreclosure glut is forcing lenders to re-think the issue and for the first time do-it-yourself mortgage modifications are possible.

Not likely. Not guaranteed. But possible.

What we commonly call a “mortgage” is really a contract between a borrower and a lender. The borrower gets cash up-front and in exchange the lender gets a promise of full repayment with interest over time. Importantly, a mortgage is secured by the property — if the borrower doesn’t pay, the lender has the right to sell the property to get back its money.

The paragraph above pretty-much describes the traditional lending system. A local lender — say a bank, savings and loan association or a credit union — made a loan to a local homeowner. The lender made sure the borrower was qualified for the loan and that the property value was sufficient to repay the debt if something went wrong. Why? The lender kept the loan for as long as it was outstanding. The lender’s profit was in the cashflow from the loan — the difference between the interest being paid each month by the borrower and the lender’s cost of funds.

In other words, mortgages were traditionally made by so-called “spread” lenders, companies that had a vested interest in getting loans right. Such lenders wanted fully-documented loans, careful property appraisals and sizeable downpayments because they were prepared to hold the loan for many years. What they didn’t want were foreclosures because foreclosures mean losses. Examples of spread lenders today include community banks, credit unions, Hudson City Bancorp and ING DIRECT USA.

Lenders Without Cash

In recent years the system has changed. Now we have lots of companies that look like “lenders” and who make loans to local borrowers. The catch is that such “lenders” either don’t have any cash to fund mortgages or they have the money but don’t want to keep the loan.

Huh? How can companies without money make loans? They sell the mortgage in an electronic arena called the secondary market. Money from the sale of the mortgage on the secondary market funds the loan.

The benefit of this system is that by selling a loan the lender now has more dollars to lend. More loans, in turn, mean more fees, charges and profits. No less important, the secondary system means that local lenders will not run out of money. If a lender has $5,00,000 and makes 10 loans for $500,000 each then it might seem as though the lender could not fund any more mortgages. However, by selling the loans in the secondary market the lender gets fresh cash and therefore can make new loans.

Now the loan — most-likely your loan — is owned by an investor, not a lender. That investor paid a given amount for your loan under the assumption that your loan would generate a certain interest rate. No less important, you probably don’t know the investor that owns your loan. Instead, your payments are likely being collected by a servicer.

Fannie & Freddie

We now know that your mortgage most probably is not owned by the company that sold you the loan. If that’s the case then who does own it?

Remember we said the loan was sold in the secondary market to an investor. Buyers on the secondary market include pension funds, insurance companies and investors worldwide. However, the two biggest buyers of local loans are Fannie Mae and Freddie Mac.

To understand the importance of Fannie Mae and Freddie Mac consider some numbers. First, it’s generally estimated that there are about 50 million homes which have been financed with a mortgage. Second, Fannie Mae and Freddie Mac own more than 30 million of those loans.

Because Fannie Mae and Freddie Mac own so many mortgages other mortgage investors — but not all — have generally adopted their standards. If you want to know how the loan system generally works it’s good to keep your eyes on Fannie Mae and Freddie Mac.

No Modifications, Not Now, Not Ever

The mortgage system generally worked well until the past few years. There surely were foreclosures in the past, but typically there were very few foreclosures and most were related to such issues as the loss of a job, the death of a spouse, medical bills and divorce.

In the last few years the situation has changed. As the federal government reported in late 2008, “delinquencies on mortgages have tripled, not just for subprime and Alt-A, but also for prime mortgages. Foreclosures have increased almost 150% from two years ago.” Figures from the foreclosure listing site, RealtyTrac.com, show that during the months of March, April and May 2009 there were more than 1,00,000 foreclosure filings nationwide –more filings than in all of 2005.

Despite new and higher foreclosure levels, investors — the folks who own loans — have generally refused to modify mortgages. Their reasoning goes like this:

First, a contract is a contract. You got the money we promised and you should pay the money you promised.

Second, if loan terms are modified we’ll get a lower rate of return.

Third, if we have an asset with a lower rate of return it’s worth less and we will have made a bad investment.

In fact, investors have a pretty good argument except for one looming problem: Foreclosure rates are high and climbing — and the loss from a foreclosure according to a Congressional report is typically $40,000 to $80,000 per property. Given the lousy choice of foreclosure or the less-lousy choice of a loan modification, investors are beginning to consider modifications.

Workouts

When lenders talk about loan workouts what they typically mean are two options:

• Modifications. A situation where the debt is restructured. For example, the loan term might be increased from 30 years to 40 years, thus reducing the monthly payment.
• Payment Plans. Loans where there’s a change in contract terms. For instance, the interest rate is reduced 1 percent for the next 12 months or penalties and fees are forgiven.

Notice that with workouts there’s one option lenders typically do not offer: A principal reduction. Notice also that in some cases monthly payments can actually rise with new mortgage terms.

Claim Advances

If you have mortgage insurance (MI), if you’re facing foreclosure and if you’re having a tough time that’s temporary then you may be able to get help from your mortgage insurance company with a claim advance.

If the property is foreclosed then the mortgage insurance company can owe big money to the lender. Instead, if your situation is short term, the mortgage insurance company may be willing to lend you money to bring the mortgage current, typically with little interest and very soft terms. Ask your lender and your mortgage insurance company about such help.

The New Deal

In November 2008 the Bush Administration announced that Fannie Mae and Freddie Mac would now offer a streamlined modification program (SMP) so that borrowers could more easily obtain loan modifications.

However, a look at the SMP standards suggests that meaningful modifications — if any — were enormously difficult to get under the program.

• SMP targets borrowers who have missed three payments or more, own and occupy their property as a primary residence and have not filed for bankruptcy.
• SMP creates a standard definition of an “affordable mortgage payment” — no more than 38 percent of a household’s monthly gross income.
• Servicers will have flexibility in modifying loans, including reducing the mortgage interest rate, extending the life of the loan or even deferring payment on part of the principal. The servicer receives an $800 payment for each modification.

The SMP standards are ridiculously impractical. Here’s why:

First, they require borrowers to miss three or more monthly payments, meaning that homeowners who participate must have lousy credit.

Some lenders counsel borrowers to purposely miss payments so they can qualify for the SMP. The view here is that such advice is terribly harmful because there’s no guarantee that the borrower will, in fact, get SMP relief and also because whether or not an SMP arrangement is possible the borrower will now have terrible credit, meaning that a new loan on sane terms from other sources will be virtually impossible.

Second, the SMP applies only to owner-occupants. This means the SMP effort is useless when an investment owner is in trouble. This anti-investor approach may seem somehow warranted because investors are supposed to face more risks than owner-occupants, but if you think about the consequences of this policy you can see that it’s misguided: If a property down the street is foreclosed and the value of YOUR home declines, no one cares if the foreclosed property was owned by an investor or an owner-occupant. All anyone sees is that there was a foreclosure and therefore a lower price shows when buyers look at local sales.

Third, the SMP says borrowers must devote at least 38 percent of their gross, pre-tax income to housing costs. In comparison, the usual qualification standard for a conventional loan is that 28 percent of the borrower’s income can be devoted to principal, interest, property taxes and insurance, what is known as “PITI” to lenders. In effect, borrowers who qualify for the SMP are required to spend vastly more money on housing than baseline conventional borrowers. The better idea is to lower monthly housing costs for troubled borrowers so their homes are not foreclosed.

Fourth, if you have declared bankruptcy you do not qualify for a loan modification under SMP — the very modification which may prevent the loss of all your assets.

Early Workouts

In December 2008, Fannie Mae — which held 18 million mortgages at the start of 2008 — said it would offer an “early workout” program as an alternative to the SMP.

How does the early workout program differ from the SMP?

• Early workouts, says the company, are “a separate Fannie Mae effort to assist a wider spectrum of distressed borrowers in various stages of delinquency, including those who are current on their loan payments but facing imminent default.” Translation: The new program can apply to borrowers who are current. You don’t have to miss mortgage payments to qualify, you don’t have to lose your credit standing.
• The early workout program has two phases, a trial period and then a modification. During the trial period a non-delinquent borrower must complete four timely, consecutive monthly payments at the new level. A delinquent borrower must make at least three consecutive monthly payments. Translation: Make certain you make all trial-period payments in full and on time. In fact, be smart — pay early.
• “Preforeclosure sales, acceptance of deeds-in-lieu of foreclosure, and short payoffs (accepting a payoff for less than the amount owed), will not be permitted loss mitigation alternatives for use with borrowers whose loans are current but are determined to be in imminent default,” says Fannie Mae. Translation: If you’re not in default why not try to save both the home and the mortgage?

While the early workout program has started with Fannie Mae it will logically be expanded to other lenders and investors. Since investor programs can differ, it’s important to know who or what actually owns your loan. Most probably, the people you identify as your “lender” are actually loan “servicers” and not the loan owners. The ability of servicers to make modification decisions may be limited — or non-existent — depending on the arrangement they have with the loan owner, something usually called a “pooling-and-servicing” (PAS) agreement.

The Obama Plan

In February 2009 the Obama Administration came out with a $75 billion foreclosure prevention plan which combines the best approaches from Fannie Mae and the FDIC.

The program is complex, but in basic terms it has two elements:

First, if you’re facing foreclosure and your loan is one of the 30 million owned by Fannie Mae and Freddie Mac, you may be able to refinance if the value of the property is not more than 25 percent greater than the remaining mortgage balance (originally the government limited refinancing to a 5 percent shortfall). In other words, the program does not require borrowers to have any equity in the property, but it does limit the amount of risk which the government is willing to take.

As the government explains: “The unpaid principal balance of the first lien mortgage does not exceed 125 percent of the current market value of the property. (For example, if the property is worth $200,000, the borrower must owe $250,000 or less on that first lien mortgage).”

Second, imagine that you’re not facing foreclosure but have a toxic loan. Payments have risen rapidly or about to rise. You’re not in trouble yet, you’re making all your payments, but you could be in hot water within the next few months.

In this case, hopefully, the lender will try to reduce your interest rate so that no more than 38 percent of your gross (pre-tax) income is set aside for housing. The government will then subsidize your loan to bring the monthly housing cost down to 31 percent. Note that not all lenders are participating in the Obama plan as of this writing.

In other words, this is the Fannie Mae early workout program supported, finally, with government funds.

The Obama plan, for the first time, uses federal dollars for real people with real mortgage problems, not just bankers and Wall Street insiders.

It’s estimated that as many as 7 to 9 million borrowers will be helped by the Obama program, however the program will not protect everyone against foreclosure. If the value of your home is too low, if you do not earn enough income or if you have a rental property that’s in trouble, you won’t be eligible for help. Unfortunately, for millions of people who have bought in recent years with little or no money down, or have bought with loans that negatively amortize, or who have lost their jobs, the Obama program will not work for them. For a list of specific limitations and exclusions, press here.

The Obama plan if successful could substantially reduce the inventory of unsold homes in many areas and thus bring a halt to home-price declines — assuming job losses can be contained. We should get some sense of the program’s success or failure by mid- to late-summer, 2009.

For additional information, try:

• http://www.financialstability.gov/makinghomeaffordable/
• http://www.freddiemac.com/avoidforeclosure/
• http://www.fanniemae.com/homeowners/index.html

Steps To Take

As you look at loan modification options you can see that loan owners logically do not want to make such arrangements if they can be avoided and they are not required to modify loans. Thus, if you want a loan modification, if you want to avoid foreclosure, you must make the first move.

What should you do? The first step is to analyze your financial situation,

1. What percentage of your gross income (your income before tax deductions) is now devoted to housing costs, meaning mortgage principal, interest, taxes and insurance — PITI.
2. How much could you pay each month if PITI was limited to 38 percent of your gross income?
3. How much could you pay each month if PITI was limited to 31 percent of your gross income? This is an important question because the FDIC has been using a 31-percent benchmark when modifying loans made by IndyMac, the lender taken over by the FDIC in 2008. The 31-percent standard has now spread to other programs.
4. What are your assets? Include such items as savings accounts, IRAs, other retirement accounts, certificates of deposit, stock, bonds, vehicles, other real estate. Be sure to include account numbers, the date when valued, contact information for the account holder such as a brokerage or bank, balances and required payments.
5. What is the value of your home? Local real estate brokers may be willing to help provide a general valuation on a pro bono basis with a comparative market analysis (CMA) or a broker’s price opinion (BPO)– it’s good PR for the broker and you could be a future source of referrals and business.
6. What are your debts? Include credit cards with account numbers, account information, total debt and required monthly payments. Also, student debts, auto loans, other mortgages, etc. Again, show account numbers, balances, required payments and contact information.
7. What are your typical monthly expenses for utilities, condo fees, gasoline, health insurance, child care, alimony, etc.
8. Have in hand your tax returns for the past three years and payment stubs for the last three payment periods.
9. Make sure your information is accurate and current. Have receipts and documents to support your statements.
10. No matter how enticing, do NOT sell your home with a quitclaim deed, especially if the property is being sold “subject to” the mortgage without FIRST speaking with a real estate attorney or legal clinic of your choice or to your state attorney general.
11. No matter how enticing, do NOT sell your home by making a payment to someone else. Remember, when you sell a home buyers pay YOU — not the other way around. Again, for specifics FIRST speak with a real estate attorney or legal clinic of your choice or to your state attorney general.

Once you’ve gathered baseline information arrange your data with a spreadsheet so it’s easy to follow — income, assets, debts, etc. Then review your numbers and write out a one-page letter explaining why your need for a modification is compelling.

One useful approach is to download and complete the free loan modification forms used under the Obama Administration’s Make Homes Affordable loan modification program.

1. Request Form (Request for Modification and Affidavit)
2. The Help Guide you can use to complete the Request Form (Request for Modification and Affidavit)
3. Tax Authorization (IRS 4506T-EZ Form)
4. Proof of Income
5. Proof of Income Checklist
6. Get contact information for major mortgage servicers that are participating in the program.

Your goal is to convince the loan owner that a modification is in HIS best interest. This is a business matter, it must reflect cold hard facts and it must be documented. Make sure your letter is properly written, properly spelled and grammatically correct. Write and re-write your letter until it discusses only the need for a modification and the probable consequences to the lender if you cannot modify the loan.

To see an example, go to LoanSafe.org and read their model hardship letter and related information.

Contacting The Lender

Take a look at your loan document. What is the loan number?

Who do you contact regarding mortgage payments? This will be the lender or the loan servicer, most likely there is an 800-number on your monthly bill. Check and see if there’s a specific number for the “loss mitigation” department or something similar.

As you communicate with the lender take these steps.

• Always write down the name of the person with whom you are speaking, the date and the time. Get their direct phone number if possible. Keep notes in a file of each and every phone call you make, with whom you spoke, the date and time, the number you called and what was said.
• Never yell at the person on the other end of the line. Their goal in life is not to make things hard for you. They may have instructions from the loan owner which makes it difficult or impossible for them to help in your situation. Always assume they’re trying their best. Remember the old saying, you catch more flies with honey than with vinegar. Treat lender representatives with respect and dignity.
• Ask for the name and number of people who actually make modification decisions. This usually means someone in the loss mitigation department. If you can’t get such information by phone, search around the lender’s website or search Google for the lender and the term “loss mitigation.”

Once you get to speak with a loss mitigator offer all the data you’ve put together. Make certain to send your materials by certified mail with a return receipt requested — this way you will have proof showing when the material was mailed, that it was received and when it was received.

Once the lender has your materials the real question then becomes will he make the modification? If yes, what changes will be made and how long will they last?

Be persistent. You must follow-up because there is no chance that a modification can be done with one letter or one phone call. Always ask what you can do to make the matter easier and faster for the loan owner — and then do it.

In the end what is your goal, what would you like from the lender? The best possible result would be a smaller and more-affordable monthly mortgage payment which has been created by a lower interest rate, a longer loan term, or both. In addition, getting the lender to waive accumulated fees, penalties and charges is also a benefit.

Once you have a lower payment then you must keep your end of the bargain — every payment, without exception, must be made in full and on time. This is not only fair to the lender, it will also help build your credit standing.

Getting Help

If you have mortgage problems there are plenty of people who are willing to help you — for a fee. Unfortunately, while there are experienced individuals and organizations who can provide assistance, there are others who simply want your money.

You are vastly more-likely to get a loan modification if you have assistance. Good sources of such assistance include:

• Local attorneys and legal clinics that specialize in real estate.
• Local law schools with pro bono or low-cost programs to assist members of the community.
• Local bar associations with pro bono programs. In Maryland, for example, the Washington Post reports that more than 600 lawyers have volunteered to help homeowners with mortgage problems.
• HUD has a list of foreclosure avoidance counselors at: http://www.hud.gov/offices/hsg/sfh/hcc/fc/.
• Your state attorney general. State attorneys general often have existing contacts with lenders. Contact your state attorney general directly for help and assistance.
• Community housing organizations — they often have contacts with local attorneys.
• Legal Services Corporation — Funds 900 offices around the country to help the poor obtain legal services.
• National Consumer Law Center — An excellent source of legal information for the public.
• LoanSafe.org has online tools and information and has been featured in the New York Times.
• The Neighborhood Assistance Corporation of America has been a forceful and effective advocate for those facing foreclosure.

Homeowners Assistance Program (HAP) For Military & Civilian Personnel

The government has established a Homeowners Assistance Program (HAP) to “assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.” Translation: It’s a program to help those who may be forced to have a short sale or foreclosure because a local base has closed or contracted.

HAP offers significant benefits — if you have any association with the military please go to the HAP site to see who qualifies and what benefits are available.

Making Home Affordable

Be certain to check the government’s loan modification web site, MakingHomeAffordable.com. This site is entirely-free and contains the latest information regarding loan modifications under the Obama program.

To Check The Stats

To see how lenders are doing, look for the latest Making Home Affordable Program Reports issued by the Treasury Department.

To Contact Lenders

The government maintains an extensive list of individual lender foreclosure and modification contacts including names, addresses, websites, phone numbers and fax numbers. Be sure to press the show all servicers link if you cannot find a lender in the search box.

Help for Lenders

If you’re a lender and want additional information, information, policies and news regarding the Making Home Affordable program, please see HUD’s special site for lenders at www.hmpadmin.com.

How To Get A Successful Loan Modification (With Obama Update) is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Answer: You need to look at this very carefully. A mortgage is a contract. It has certain terms and conditions. You want to honor all conditions.

In the usual case and with virtually all lenders mortgage payments are due on a certain day each month. Payments made after the due date are, literally, late. The question then becomes: What are the consequences of being late?

Most mortgage agreements today provide a grace period after the due date. There is no late fee for payments received during the grace period — but the payment is, again, literally late.

The reason for grace periods is that payments can be delayed in the mails, due dates fall on holidays, a payment may not be immediately processed, etc. Rather than debate when a payment was mailed or how it was processed, lenders allow a grace period.

The consequences of a payment received during the grace period are, usually, zero. There is no late fee and nothing shows up on your credit record. (Payments less than 30 days late, even if they result in a late fee, typically are not reported to credit bureaus or listed on credit reports, thus they will not impact credit scores.)

Why do I say usually? Because not all loan agreements have grace periods. A mortgage agreement read literally could allow a late payment to result in the loan being called. And not all mortgage contracts are fair — think of predatory loans where interest rates can rise or step fees can be imposed when payments are late. For these and other reasons, borrowers should make a point of always paying mortgages on or before due dates.

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Syndicated originally by Content That Works and posted with permission.

Are Late Mortgage Payments Ever Okay? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: credit, late, loan, mortgage, penalty, predatory, report, score

Long ago I happily financed an investment property with a 40-year adjustable-rate mortgage that used the 11th District Cost of Funds Index. This is not particularly a loan I would recommend for homebuyers in general, but it does have pros and cons.

The big disadvantage is the 40-year term — it’s much cheaper to finance for a shorter term or, as we have done, to make prepayments. The big plus was that the 11th District COFI is generally slow to rise and slow to fall, thus avoiding sharp payment changes.

In the past few months my lender has been calling to ask about my payments, a practice which caused me to ask: Have they been late? No. Do I owe late fees? No. Does my credit report show any late payments? No no again.

My loan payment, as with many loans, has a payment due on a given day each month. It also has a grace period that lasts about two weeks. This is very generous arrangement is right in the loan papers, in black and white.

If you think about it, a payment made after the due date can be seen as “late” and I am not one to recommend making late payments — especially since many loan agreements mean exactly what they say. However, in this case we have an ineffectual definition of the term “late” because within the terms and clauses of this particular loan agreement being “late” is not a financial sin as long as the payment is received within the grace period.

Alas, each day payments are delayed there is less “float” on which the lender can collect interest. So, for example, if you send in your payment early you don’t pay less interest on your mortgage but the lender makes more dollars because it has additional time to use your cash. Alternatively, my particular loan allows borrowers to get the benefit of that precious float without penalty.

And so a few months ago I began to get calls from my lender mooing and honking about my “late” payments. It was explained that this was a terrible thing and that I should rush to send in my money. And why was that I wondered? Did I owe a late fee? Was there a black mark on my credit report? What, as actors might ask, was my motivation?

I can understand why a lender might make such calls — precious float dollars are being lost by borrowers who are merely following the dictates of their contractual obligations.

With the second call I asked the lender to stop phoning, that their purpose was obvious. In the third call I was told I would have to write them a letter to end their harassment. I explained that if I wrote a letter to anyone it would be a smoldering note to regulators and state attorneys general.

This month all seems blissfully quiet on the urgent payment front. I can imagine why. It’s obnoxious to harass customers who have done nothing other than comply in good faith with their loan agreements. It’s just a guess, but I bet more than a few people complained.

With the exception of politicians I am generally not in favor of anyone losing their jobs, but no doubt the authors of this dialing-for-dollars scheme can contribute more to society in positions with reduced responsibilities and smaller paychecks. After all, just think about the float lenders could earn if only selected executive salaries were lower….

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Published originally by Realty Times on November 2, 2004 and posted with permission.

A Foul Call From Lenders is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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However, be aware that being late may cause you to violate loan and credit agreements, such as mortgage contracts. While many creditors have a grace period during which late fees are not assessed, a late payment is still — well — late.

Also, there are lenders who really, seriously, no-kidding mean that a payment is due by a certain date, there is no grace period, and they will assess penalties and even seek foreclosure for tardy payments. It’s not usual, normal, or reasonable, but there are lenders and loans to be avoided.

Will Late Bill Paying Impact A Mortgage Application? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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