The last few years have been extremely difficult for many homeowners. With changes to income, uncertainty about work, health concerns and a variety of other factors, many people are facing issues with their mortgage.
Most people recall the last mortgage crisis in the late 2000’s and the programs that the Federal government put into place to assist homeowners such as the Home Affordable Modification Program (HAMP). That program ended in 2016. Currently, there are no Federal programs like HAMP in place. The only recent program was under the CARES Act, which allowed homeowners to request that their mortgage be put into forbearance for (2) 180-day periods. That may have helped for a while, but the homeowner still owes the money and eventually has to pay it back. Now, lenders have different “in-house” type programs to assist those facing foreclosure. These are fact specific and can be tricky to navigate.
Since I know it is quickly becoming an issue, I figured it was time to review a couple of options that a homeowner facing foreclosure may have.
The end result of a mortgage modification is that the lender agrees to modify the terms of your existing mortgage by lowering the interest rate and extending the term, thereby reducing your monthly payment. In some instances, the past due amounts are capitalized, or deferred to the end of the loan and need to be paid as a balloon payment. The lender’s financial review is much like the process of qualifying for a mortgage and you will need to produce the same financial documents.
A mortgage modification is not for everyone. You will need to meet certain requirements and income levels for eligibility like the home being your main residence, proof of a financial hardship and proof you have income that would allow you to pay your mortgage. Tax returns, bank statements, pay stubs, etc. along with a financial hardship letter outlining your circumstances, will be needed. You may need to show that your hardship has ended and that you can actually afford a payment.
A short sale can be an option when you cannot qualify for a mortgage modification or your property is worth significantly less than what you owe. Essentially, your lender will agree to take less to pay off the mortgage. If you have a second loan (a HELOC) or judgments, etc., we have to get the creditors to take less so that the liens will be released. Generally, the costs of the sale, such as real estate and attorney fees, transfer taxes, etc., are paid from the proceeds. This can be a lengthy process, but your house can be listed exclusively, so you won’t have signs on your door or in your yard. A negotiator will work with the bank to agree on a fair price for your home and it acts like a regular closing after that. You can even pre-sign everything so you don’t have to attend the closing.
When you come into the office for your first meeting, we will review your options and decide what is best for you long-term. It will all depend on your goals. You will need to bring the following documentation:
Deed (if you have a copy); Real estate tax bill; Two years of tax returns; Mortgage statement; W2s; Two months of bank statements; Two months of consecutive pay stubs; A current utility bill; Proof of other income (there are special things we will need if you own a business or are a 1099 consultant.)
In Other News…
Real estate is still booming, so contacting us can help you get your offer in solid shape. Bidding wars aren’t going anywhere anytime soon. A well-placed offer and an educated buyer helps get the bid accepted.
In personal news, I had the honor of receiving a Power Professionals/Power Attorneys of New York award from Schneps Media and we had a beautiful celebration at The Mansion at Oyster Bay. It was great to feel the energy in the room.
My son Jamie turned 18! He graduates in just a few weeks. It’s really an exciting time here and I am looking forward to summer traveling and family events. Reminder – for those of you with kids turning 18, make your appointment to have them sign a health care proxy and a power of attorney!