Has anyone seen a trial loan mod or a permanate loan mod approved to a homeowner with equity in his home? Do different lenders have different policies on this?
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Has anyone seen a trial loan mod or a permanate loan mod approved to a homeowner with equity in his home? Do different lenders have different policies on this?
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If the loan is an FHA or VA loan, they can usually get a rate reduction...like a refi.
Thanks for asking this question. I know of someone who has a tremendous amount of equity in their home but their income is so low that they can't qualify for a refinance. They have been working with Wells Fargo and have been denied loan mods. They just missed their first house payment so now hoping that the folks at Wells will do the modification. I will make a point of contacting them as this has worried me since they first mentioned it. I just don't trust these banks and worry that they could be foreclosed on if they are not careful.
If the income is not there to pay the debt, it really does not matter how much equity is in the process. From my point of view, the only option would be to pull out the equity to pay off the debt. This would require the sale of the property. If the property goes into foreclosure, I am sure that they lenders will make sure that there is no equity remaining to pay to the homeowners.
I would advise your client that maybe now is the time to sell and downsize. If they can get market value for the property and pay off the loan, their remaining equity could be used to either purchase a property within their budget or to pay rent for sometime.
If the home is underwater and the equity does not cover the difference between the loan and the current market value, you will solid ground to apply for HAMP. That is if the loan was made before January 1, 2009 and "you have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments." Other loan modifications require that the current PITI be more than 31% of their income.
Honestly, it really depends on the amount of equity in the home. If there is a sizable amount, it will be smarter to simply do a conventional refinance.
According to my contact at the Treasury Dept. the short answer to if they would qualify for HAMP was no. If they have Equity they should sell.