Second Chance Loan Modifications

Homeowners that were denied loan modifications last year might give the process another try as lenders continue to sign on to the Obama Administration's Making Home Affordable plan. They might have been denied last year, but under the new guidelines, it's a whole new world, said Joan LaFemina, manager of the homeowner services program at the nonprofit Community Development Corp. of Long Island.


Many of the lenders are re-evaluating loan modification applicants that were turned down previously but may be considered viable borrowers under the new guidelines. Part of the motivation for the lender's willingness to grant a second pass to applicants for loan modifications could be the incentives paid to them over time frames of three to five years for successful loan modifications. Lenders can receive incentive payments just for trying to implement loan modifications so it's no surprise that they are taking a more flexible stance. With additional government funds directed at reducing a borrower's loan to income ratio to a maximum of thirty one percent, lenders are becoming increasingly comfortable with executing loan modifications with homeowners that that were considered as high risks nine months ago.

The standard procedure for the second try loan modifications sets up a trial period for the borrower while the loan modification is being evaluated. During the trial period the mortgage payment can be reduced from $500 to over $1,000 per month, but there is zero tolerance for late payments and other infractions. In fact, during the trial there are no grace periods for late payments at all. They need to ask what the due date is and the exact amount, with the cents, LaFemina advised homeowners.

If a payment during the trial period is received even one day late the borrower will be disqualified from the trial period and be deemed ineligible for the government sponsored loan program. This would be considered a second strike on the borrower, making any successful attempts to modify in the future very unlikely. A returned check will result in the same actions so borrowers are encouraged to send certified funds or make payments by wire transfer or Western Union.

Once the trial period is completed, the borrower can enter a loan modification process following the guidelines set forth in the Making Home Affordable plan. Depending on the specific conditions facing the borrower, interest rates can be reset to as low as 2%, missed payments can be pushed back to the end of the loan, and there is a possibility that some of the principle on the loan balance can be reduced.

The second chance that the Making Home Affordable plan provides could be the difference between borrowers staying in their homes instead of losing them to foreclosure or filing bankruptcy. While the restrictions are tight, borrowers with the discipline to stay on track through the trial can get a modification which will save thousands of dollars and make their mortgage affordable again. It's definitely a second chance worth taking.

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The information contained herein is provided for general information and advertising purposes only and is not intended to convey a legal option nor legal advice for any particular case or situation. Nothing in this article shall create an attorney-client relationship. Nothing sent to this law office via e-mail shall constitute an attorney-client relationship. Nothing contained in this article shall be construed to be a guarantee or prediction of result. Prior results are provided for general information purposes only and do not guaranty, warranty or predict a similar outcome with respect to any future matter. Results achieved depend on individual circumstances and not everyone will qualify or be successful in restructuring their mortgage loan.

Alex is a famous author who writes about Loan Modification. FeldMan Law Center is a free resource for millions of people to find information regarding several topics related to loan modifications and resources to information.

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The Los Angeles Times on Foreclosures

According to a story in the Los Angeles Times, a larger number of Californians are failing to make their mortgage payments than at any other time in the last couple of decades. However, even less of these Californians are actually losing their homes. The increasing rate of unemployment, in conjunction with the enduring recession, is contributing towards this climbing rate.


Refinancing of loans is another cause of the towering default rate, according to experts. Because plethora of requests are made for lenders to modify loan terms, they had been focusing more on borrowers who have been defaulting on payments rather than on those who are consistent with making their payments on time. However, under current guidelines, a homeowner can’t get refinanced if he has missed a payment. He can, nevertheless, get a modification.

Due to lenders self imposed moratorium on foreclosures, there was a drop in the amount of actual foreclosures in the first quarter of 2009 to 43,620, a 6% decrease from the fourth quarter of 2008. Amendments that have been made to state law also may have played a small role. These amendments made it more burdensome for lenders to foreclose, according to DataQuick. Moreover, lenders found themselves understaffed to handle the increase in paperwork that resulted in backlogs and considerable delays.

The number of foreclosures has fallen nationally as well. According to RealtyTrac of Irvine, there has been a 13% decrease in the number of homes repossessed by banks and a 10% increase in the number of defaults. Fannie Mae and Fannie Mac have ceased foreclosures on loans that they themselves manage. All the while, Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., Morgan Stanley and Wells Fargo & Co. adhered, as they waited for President Obama to bring his housing plan to fruition.

In spite of this, “many troubled borrowers in California are not eligible for help under Obama’s plan because they owe much more on their loans than their homes are worth. To qualify for one of Obama’s programs, a mortgage’s balance must be no more than 105% of the value of the home”, quotes the Los Angeles Times.

Now that the unemployment rate has hit 11.2% in California and 8.5% nationally, economists surmise an increase in the difficulty people will face in making their mortgage payments, which will unfortunately also lead to more defaults. On the other hand, it is also presumed that foreclosures may not follow the same path, as “banks don’t want to overtax a housing market already flooded with cut-rate properties repossessed by lenders.” Attorney Jeff Isaacs suggests that borrowers hire attorneys to help with loan modifications. Isaacs believes that “There is so much confusion out there, and people end up making really bad decisions, like borrowing against their 401(k) to make their house payments. You do that and you are destined for real misery down the road.”

Legal Disclaimer
The information contained herein is provided for general information and advertising purposes only and is not intended to convey a legal option nor legal advice for any particular case or situation. Nothing in this article shall create an attorney-client relationship. Nothing sent to this law office via e-mail shall constitute an attorney-client relationship. Nothing contained in this article shall be construed to be a guarantee or prediction of result. Prior results are provided for general information purposes only and do not guaranty, warranty or predict a similar outcome with respect to any future matter. Results achieved depend on individual circumstances and not everyone will qualify or be successful in restructuring their mortgage loan.

Alex is a famous author who writes about Loan Modification. FeldMan Law Center is a free resource for millions of people to find information regarding several topics related to loan modifications and resources to information.

Author: loanmodification


Visit the National Debt Solution Center Website
Resources and Information About Loan Modification
Find the Answers You Need and Get Help Today
Lower Your House Payments with Expert Attorney Assistance