You've finally reached someone at your mortgage company who has the authority to change your loan terms and offer relief from the payments you've been struggling to pay.
Congratulations.
If you've landed a second chance with your mortgage lender, you've already accomplished more than the thousands of other homeowners, who go straight into foreclosure.
Unfortunately, though, research shows that substantial numbers of distressed homeowners who had their mortgages modified last year fell behind on payments again.
Getting a mortgage "fixed" only to fail again is another sad twist in this already heart-rending housing situation. But experts offer this hope: As the crisis unfolds, the government and lending companies are learning what works to give homeowners a bona fide second chance. Moreover, experts say consumers can also use some strategies to help negotiate realistic loan terms for themselves.
It's really not surprising that homeowners thrown a lifeline drown in debt quickly again, contends Alan M. White, professor at Valparaiso University School of Law. White studied subprime and near-subprime loans modified last November and found that in slightly more than half of the cases, the borrower's monthly payment remained the same -- and in some instances increased -- from what it had previously been. Because late fees and missed payments are tacked onto the loan amount and recalculated in new payments, borrowers often don't see a reduction in what they owe each month.
The new mortgage plan announced by the Obama administration Feb. 18 aims to keep monthly housing payments, which includes mortgage principal and interest, the monthly property tax allotment and monthly homeowner insurance, at 31 percent of the borrower's pre-tax household income.
That 31 percent allotment may become a benchmark in modifications, regardless of whether a borrower receives a modification under the new plan, says Geoff Smith, vice president of the Woodstock Institute, a Chicago nonprofit that studies housing issues. "Hopefully, this will make a difference," he says.
But mortgage payments even more modest than 31 percent of income won't work for many individual families, says Michael van Zalingen, director of homeownership services at Neighborhood Housing Services of Chicago. "A lot of the families we counsel are working-class, making between $25,000 and $50,000 per household. Often, they are behind on their mortgage payment even when that payment is just 25 percent of their income. There is so much other debt, like credit card and car loans," he says. That debt causes them to fall behind on all their bills.
Some households simply have too little income and too big a mortgage balance, adds Smith. Even if the interest rate or principal owed were cut, payments would still be too high to pay comfortably.
The best tactic for borrowers looking for a modification they can live with is to provide an accurate picture of their total expenses and income, and even suggest a payment that they think they can live with, White says.
"That's exactly what we are asking people to do," confirms Ed Delgado, senior vice president of government relations at Wells Fargo Home Mortgage. "That's how we can help them with a solution that might be best to their personal situation."
Bankrate suggests a step-by-step plan when seeking help from a mortgage company, including a list of what paperwork you will need before calling. Delgado says that Wells Fargo's Web site also lists what consumers should gather to document their budgets: wage receipts, recent tax returns, bank and financial statements, and information about any other liens that may be on the home. Similar information as well as a basic primer on the new modification plans aiming at a 31 percent payment is on The White House Briefing Room online.
Most mortgage rates fell slightly this week, although the 30-year jumbo jumped much higher.
The average 30-year fixed-rate slipped 4 basis points, to 5.37 percent. A basis point is one-hundredth of a percentage point.
This week's average 15-year fixed -- a popular option for refinancing -- fell 6 basis points, to 4.88 percent.
In contrast, the average jumbo 30-year fixed jumped 22 basis points, to 6.99 percent.
Adjustable-rate mortgages were split this week. The one-year adjustable-rate mortgage rose 15 basis points, to 5.58 percent. The popular 5/1 ARM fell 5 basis points, to 5.34 percent.
(Distributed by Scripps Howard News Service. Reach Marilyn Kennedy Melia at editors(at)bankrate.com)
REAL ESTATE WATCHMust credit bankrate.com
I think wells fargo mortgage bank is not doing anithing
I wrote a lot of time to wells fargo bank, and they never wrote back to me, I want a morgage modified, somebody can help me, i am not late in the payments, but, actually it is for me to dificult make the mortgage payment, I am trying to talk with the bank directly and do not hire a lawyer, if i do not have money to pay the morgage less I have It to pay a lawyer.
Did Wells Fargo Mortgage help anyone?
We're so "underwater" and would need to know if what is our options.
There are suggestions of stopping payment and give the case to lawyer?
Please advise.
Oh Mr. Wells Fargo, its shameful what your bank gets up to!
Ed Delgado, senior vice president of government relations at Wells Fargo Home Mortgage isn't doing anything to help me but his financial empire is so good at denying me a refinance even though it would actually help me ALOT! Did I miss something or isn't that the point of getting the refinance. If I keep coming up with the mortgage albeit 30 days late now, then surely I can pay the refinanced lesser amounts especially if I consoliday!! His other part of the financial empire just loves the harrasement that they do so well over the constant calls 6 - 8 aday, because I asked for a loan modification and now they have my phone number to abuse me with their constant rudeness and stupidity all over 30days past due on a mortgage that is almost now 11% few weeks ago it was over 12%!! Four years ago BTM(before this mess)Wells Fargo sent me a glowing letter begging for my custom now after being scammed at the last few minutes of the closing of my home due to the financier not doing do diligence all those weeks before the day of closing, I find my credit score and debt ratio not to your delicate sensibilities and your cherry picking the business. But I receive a snotty letter telling me I am not good enough for a refinance and by the way I still haven't received the package for the loan modification, what a surprise!
Wells Fargo, Do they really want to help?
Like millions of hard working Americans, my wife and I, due to a job loss, found ourselves in default with our mortgage with Wells Fargo in 2008. Determined to keep our home we were open to all options as we have two small children to consider and of course uprooting their home and life was not an option for us. So in short, we contacted WF requesting a loan modification. After jumping through what seemed like millions of hoops,countless phone calls and paper work,paying over 10K in back payments, WF finally produced what they considered a "fair" loan re-modification. Here is how they laid it out and please keep in mind that our loan balance on the principle was only $223,000.00! Our payments were $1855 per month which included property taxes.
So it went like this. We will reinstate your loan, tack on $14K in interest, raise your monthly payment to $1881.47 and lower your interest rate to 7.1 from 7.35 . So...now we have a mortgage for $245,000. Realizing this was not even close to fair, we quickly contacted WF to renegotiate. Guess what? Yep....WF said that was the best they could do, either except it or we will continue with the foreclosure. We told them that the idea was to make our home affordable, not unfordable and that if we accepted it we could end up in the same position months down the road. Well to be short....we accepted it knowing what might happen and became determined to make it work. I took on extra work where I could find it, paid off as much debt as I could, got rid of all the non essentials and put our noses to the grindstone. The plan worked for about six months and then I was laid off once again! Now, approaching default again, we contacted WF to start another loan re-modification in hopes that Obama's new "Making The Home Affordable" program will work. Fingers crossed but not our last ACE in the hole! We also said "we told you so WF but you wouldn't listen."
Now granted, WF was one of the first banks to accept 25 BILLION in TARP relief with more coming from guess who? you and I, john-Q the taxpayer. Kind of makes you wonder what happened to "for the people by the people"
Now our home, due to the fall in housing prices is worth $85,000 less than what is owed and we are fighting to keep it once again. God Bless America, right????????
WF....you are a greedy bastard with little regard for preserving the American Dream! See you in court and be prepared to open your books for the last 7 years! Let's see how much predatory lending and fraud you have committed over the years. Enjoy FCC, your going to have a field day with WF!
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