Mortgage Relief Program Qualifications: Speaking With Mortgage Companies

July 20th, 2011 | Posted in Debt Relief

It must be noted that we are not giving advice on whether any particular property or borrower can avail themselves of the new FHA loans. For that, the borrower will have to have the situation underwritten by the FHA lender. These comments are generalities only, but bear upon a borrower’s consideration of whether they have any real chance of obtaining such a loan. This Act gives the FHA 300 billion dollars to be used between October of 2008 and September of 2011 to refinance certain loans made prior to January 1, 2008. It is intended to allow homeowners who cannot afford their present loans to refinance them through cooperating lenders and holders.

This legislation has been heralded as a way for almost 400,000 homeowners to avoid foreclosure. Critics, however, have noted that the Act really will not help many who will be foreclosed upon. In truth, we believe that the Act will be of some assistance, but cannot help but comment that it, by its basic construct, is not really intended to help most of those in trouble. To begin with, if one takes 300 billion dollars and divides it by 400,000 expected beneficiaries, that is an average loan size of $75,000 while the average mortgage in the United States is well in excess of $120,000. If that mortgage relief program qualifications is used, the number of borrowers that can be helped is only 250,000. If there are another 2 million foreclosures over the next 3 years (which may be a low figure) that is less than 15%. This legislation, in our opinion, was a compromise with powerful banking lobbies.

Second Critical Element: Knowing if your file is actually in review. If you are calling up only to find out if you have been received or not, then you lessen your chances for your file to be accepted or to get the run around. Your file will typically receive two reviews before accepted. As such, when you call in after you have sent your application in you will first want to know if you file is in review. The second is the underwriter review. If you know your application has already been reviewed (or in review) follow up with your bank weekly to verify that it has been sent the to underwriter for final review.

We believe that it is prudent to assume that, where depreciation has been greatest; generally where foreclosures have been greatest, holders will be unwilling to accept this level of loss. Although one can argue that this loss is still better than what they would experience in a foreclosure, it does not take into account the fact that, in a foreclosure, in most instances, the holder can still pursue the borrower for a deficiency judgment. Some would say that holders know that they almost can never recover those judgments, and will not try to collect upon them. But, lenders may still use them as leverage to obtain some amount, at some future time.

Even if the borrower declares bankruptcy seeking a wage earners Chapter 13 plan, the holder will receive a portion of that deficiency amount. Only some borrowers can obtain a release through a Chapter 7 bankruptcy. In all other instances the holder will garnish wages or attach other assets to receive some amount of the deficiency. For this, and other reasons, lenders may take their chances in a sheriff’s sale and simply foreclose. Other proponents of the Act claim that lenders will be under enormous political pressure to allow FHA refinancing. Although only time will tell, we believe that lenders will largely “dig in their heels” when they think that they can obtain a better deal in a foreclosure.

Learn more about Obama Mortgage Relief Plan Qualifications.