Frequently Asked Questions

Frequently Asked Questions

It is understandable to have questions when coping with a new and challenging situation, especially when a home is at stake. The reality is that millions of homeowners across the country are finding out that they have more questions than answers. We hope that the following information will help you better understand the circumstances. If you have further questions not addressed below, or would like additional information resources, please contact us.

Do I qualify for a short sale?

The qualifications for a short sale include any or all of the following:

Financial Hardship — There is a situation causing you to have trouble affording your mortgage.
Monthly Income Shortfall — In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
Insolvency — The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.What is a mortgage modification?

The ideal approval is a full lien release with no further obligation. Variations of this however, maybe the best that can be negotiated. See disclosure statement below.

What is a mortgage modification?

A mortgage modification is a process through which your mortgage lender changes any or all of the following:

Your interest rate

Your principal balance (through a reduction)

Your loan terms (example: from an adjustable to a fixed rate)

This process can allow borrowers to stay in their property when they can no longer afford their current mortgage payments.

Why would a lender modify my mortgage?

Lenders have realized that in some cases it is better for them to work with current borrowers to lower payments or possibly improve terms in order to keep homeowners in their properties. The average foreclosure can cost a lender from 35-50% of the value of a property, so keeping borrowers in their homes is a good option for everyone.

What do I need to qualify for a mortgage modification?

According to the Making Home Affordable Web site (www.MakingHomeAffordable.gov), you will need the following information for your lender to consider a modification:

Information about your first mortgage, such as your monthly mortgage statement

Information about any second mortgage or home equity line of credit on the house

Account balances and minimum monthly payments due on all of your credit cards

Account balances and monthly payments on all your other debts such as student loans and car loans

Your most recent income tax return

Information about your savings and other assets

Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources

If applicable, it may also be helpful to have a letter describing any circumstances that caused your income to reduce or expenses to increase (job loss, divorce, illness, etc.)

How do I qualify for a mortgage modification?

The first call you make should be to your lender, have the information above ready to discuss with them and call your customer service line to ask them what options you have available. If the person you speak with does not understand what you are asking, you can ask to be referred to one of the following departments (different lenders have different names for these departments):

Loss Mitigation

Mortgage Modification

H.O.P.E.

Prior to contacting your mortgage lender you can quickly complete an eligibility test at www.MakingHomeAffordable.gov. This test will let you know if you are eligible for a modification through the government-sponsored Home Affordability and Stability Program (HASP). For a list of mortgage lenders and servicers, visit www.HopeNow.com.

What if I don't qualify for a mortgage modification, can't afford my home, and owe more than it's worth?

You are not alone and foreclosure is not the only option. If your mortgage lender or servicer will not work with you to reduce your payment, you may want to consider a short sale. Agents like me, with the Certified Distressed Property Expert? Designation, have undergone extensive training in how to process and negotiate short sales. A short sale allows you to sell your home for less than what you owe and avoid foreclosure. Speak to your market expert to see if you may qualify.

What is a Home Affordable Refinance?

If Fannie Mae or Freddie Mac owns your mortgage, you may be eligible for a Home Affordable Refinance. This will allow you to refinance your home and often lower your payments.

What are the qualifications for a Home Affordable Refinance?

According to the resources released by the government, following are a list of qualifications:

You are the owner occupant of a one- to four-unit home

The loan on your property is owned or securitized by Fannie Mae or Freddie Mac

At the time you apply, you are current on your mortgage payments (you haven't been more than 30 days late on your mortgage payment in the last 12 months, or if you have had the loan for less than 12 months, you have never missed a payment)

You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house

You have income sufficient to support the new mortgage payments, and the refinance improves the long-term affordability or stability of your loan

Before doing a Short Sale, here's 3 things you should consider

How does a short sale affect my credit?

A short sale is like smash in your car door and a foreclosure is like totaling your car. A smashed door like a short sale is lot easier to repair. That is as specific as I can get, because I have some across so much information on this, that the only way you will really know is when you see your credit report. There are a lot of factors that come into consideration regarding your credit score, making it difficult to predetermine what it will be before an event takes place.

What are the tax consequences?

The lender will issue you a 1099C on the difference and you will need to treat that difference as income. This creates a taxable situation. However, if you use IRS form 982, you may be relieved of the tax burden. See excerpt from IRS web site. "This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn't apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home's value or the taxpayer's financial condition. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision." IRS.com 1-19-09

What happens to the difference I owe the Bank?