Mortgage Upside Down? Fred Solomon Reports 7 Things You Should Know

Why are there more short sales and foreclosures today? 70% of Californians have some sort of adjustable feature inside of their mortgage.  An alarming 34% of Americans have no clue what kind of mortgage that they have.  CNBC recently reported that $1.4 trillion of loans are going into default.  The loan business is a $10 Trillion business – that’s 14% of all loans in the United States that are going into default.

Many homeowners are considering a note modification.  One of the biggest myths is that you have to be behind in your mortgage.  This is an agreement with the lender to change/modify the terms of a loan  in lieu of a foreclosure or short sale.  It’s a win-win situation for the bank and the owner of the home.  It allows the owner to be able to continue living in their home without being forced to sell or having the bank foreclose on their property.  It allows the lender to save on the costs of a foreclosure or having to take a reduced pay off on a short sale.  A note modification is for someone who cannot afford their monthly payment but wants to stay in their home.  For the lender, a note modification is a better alternative than a short sale, which is typically a better alternative than a foreclosure. 

In order to get a note modification approved, the lenders are looking for a debt to income of about 80% of the borrower’s net monthly income.  So you add up all your monthly debts (including your mortgage) and if your debts are higher than 80% of your monthly income, you will qualify for a note modification.  In this example, you would reduce your monthly payment on your mortgage to 80% of your net monthly income. Let’s say your net monthly income is $4,000 per month - 80% of that would be $3,200.  That means, that all of your debts added together should not exceed $3,200 & if they do, then you would reduce your mortgage payment to whatever the amount would be to add up to no higher than $3,200.

When shopping around for a loan/note modification company, ask the following questions:
1.    How many have they done?  Will they give you a list of clients you could call to confirm their customer satisfaction level?  People say they have done a lot of note modifications or short sales and they have not. 
2.    What is their Better Business Bureau Rating?  You want to work with an A to AAA rated company.
3.    If it is an attorney that is handling your note modification, look them up on your state bar's website.  Look at what they specialize in.  Many attorneys are jumping into this trend with little to no experience and charging too much.
4.    What is the cost?  Costs can range from $1,495 to $4,995 based on the loan balance (under $150,000 to over $1million).
5.    Do they offer a money back guarantee?  Get it in writing. What is their policy? For example, Solomon Financial helps a client in need by explaining to the client all of their options, with a partial money back guarantee, when they can’t afford their monthly mortgage payment.  If the property doesn’t sell, it will end up becoming a foreclosure and the bank will take back the property as an REO.  We take 50% payment up front and if the modification is not approved part of that will be refunded and we can help with a short sale.  We can provide our price list to you.
6.    Will they give you referrals for real estate attorneys and CPA’s so you understand all of your tax and legal consequences of a short sale compared to a foreclosure (if you don’t qualify for a note modification).
7.    What happens if the loan modification company does not get the modification approved, do they help you with the short sale and help get the property sold for you?  Are they helping you or just providing a service and if you don't qualify for the service that they provide, do they say, "Sorry, sir, we don't provide that service."  Where does that leave the client and their family? Foreclosure?  You bet.
8.  Ask how it will affect your credit.

For additional information on the news that is the subject of this press release contact Fred Solomon or visit www.freemoneyhour.com

Fred Solomon is co-host of The Solomon Free Money Hour Talk Show; trainer-speaker on real estate, foreclosure, current mortgage and market trends; author of PUT YOUR MONEY WHERE YOUR HOUSE IS.