Many officials are encouraging homeowners to call their lender directly if they are having difficulty making their mortgage payment. Supposedly, they can help us with Mortgage Modification, yet, we are often asked "How can I figure out what to ask them? I'm not a Banker or Mortgage Broker!"
Well... The more Loan Modification Information We Have, the better the odds are! Your increased knowledge puts those odds in Your favor!
Here are some problems mortgage refinancing problems We face and the right steps We can take to get started, today!
The real Foreclosure difficulty is that if we call our lender,
A. Who do we specifically have to talk to?
B. What Do we Ask Them?
C. Do they understand the situation of our home or business loan?
D. Worse, does our lender know what needs to be done in order to change the terms of the mortgage?
E. What if they delay, through ignorance, so much that the foreclosure goes through anyway?
What causes these difficulties? Many reasons, of course, but strong among those reasons is how the Mortgage was financed in the first place. What follows is my own personal picture of how this American Budget Crisis got going. I could be wrong, but I believe it would only be in how much blame belongs in one place or another. If something I say does not gel with what You think, then please check it out with other sources, okay?
It is the year 2006 and You want to buy a home, so You go to Your local bank, The Friendly United Neighborhood, Inc., Bank. It is known as the FUNI Bank. The "Mega Banks" follow the same guidelines outlined here, just on a different scale.
The friendly people at the FUNI Bank have been working with homeowners and business financing all over Your County for years. They know You, personally, and have an excellent relationship with the local arts community, the Chamber of Commerce and many others, including the High School Band and Football Team.
Prices on homes in Your area have been climbing lately, demand is rising, and more people are moving into Your state, so a lot of people want new mortgages. Well, a local bank has relatively limited resources. Once they have lent out money for, let's say, five hundred houses, they are out of available investment cash, and have to go to outside funding to keep helping people.
Now, there have been a goodly number of US Presidents, Senators, and Congressmen who have been pressured by their friendly lobbyists, community activists, home builders and many others from both the left and right sides of the political spectrum. What do these loudmouths want? Well, the ones on the left want everyone to own a home, whether they can afford it or not, while the right leaning builders, realtors, and bankers want [duh!] pretty much the same thing!
As an aside, some elected officials, on the right AND the left, do want oversight, don't want to make home loans to people who can't afford McMansions, and try to improve regulations over the housing process. However, for the last twenty or so years, they have been overridden by idiots who had personal desires or beliefs that thwarted proper controls. [Although these are, obviously, my personal opinions, they are not necessarily incorrect, I say with a laugh!]
With all that pressure, the nicely elected officials who have been charged with handling our country's economic policies effectively and fairly, decide that the nicest thing they can do [to get re-elected, their Real First Priority] is to ask their buddies over at Fannie Mae and Freddie Mac to lend everybody who wants a home loan all the money they need!
Now, Everybody is Happy!
Except for one tiny little problem: The Federal Government can't just print that money to cover all of those homeowner's mortgages. [Or can it? Another topic for discussion, isn't it?] So, how do they get enough money to keep their books nicely balanced?
Well, here is an idea! Let's package groups of these home and business financing mortgages together into nice little "Bundles" and then sell these bundles to any suckers who will take them [excuse me, I meant sell them to Insurance Companies, 401K and IRA Managers, Big Companies with extra cash, and lots of School, Union, City, State, Police Retirement Funds, and even other Countries and their Banks].
Now, why will all those suckers [whoops, I did it again] buy all of those bundles of mortgages? Well, it seems that there are other un-named companies who rate these bundles of home and business mortgages, city bonds, pig or corn futures, and anything else that people are willing to invest in. This is done in order that the investors have a reasonable idea for the safety of their money.
Unfortunately, those rating companies also need cash to live on. It just seems to work out that a goodly portion of their income is from those same investment/finance companies they are rating! Remember those rating companies; they come back into the game, later.
They are kind of like those Real Estate Appraisers who are figuring out the value of that home or commercial building You want to buy.
Now, the Appraiser that Your Realtor uses is just as honest as the one on the next block. Yet it seems that Your Builder/Realtor has twice as much business as anybody else in the county and really wants a $300,000 value on this house.
So using the same sets of statistics as the next appraiser, this one figures out a legitimate, rational way to say that $300,000 is appropriate. While not exactly being bribed, this Appraisal Company will get more activity from this Builder/Realtor, therefore more income. That income will keep their kids in private school, give them a longer vacation, or be able to help them buy a bigger house for their family.
I hate to bring this up, but there have been rumors floating around that some of those appraisers might have ACCIDENTALLY nudged the numbers a little bit. Your neighbor's 2300 square foot home just might have had a typographical error and included the 300 feet from the garage as part of the heated area, or the two 8'X10' bedrooms might be listed as 10'X12's.
Those rumors couldn't be true, do You think?
Unfortunately, the Appraiser who is more accurate in his numbers might be more honest and morally better, but his company will possibly fail since the other one gets 90% of the business from the Builders and Realtors!
If the Investor, the Buyer, the Builder, the Appraiser, the Realtor, the FUNI Bank, the Mega Bank, Fannie, Freddie, the Mortgage Bundle Rater, and everybody else uses that same kind of wishful thinking, then prices of homes keep rising. The bundle purchasers keep getting great returns, more mortgages get placed, more developments get built, until suddenly the whole Ponzi Scheme falls apart, because there are not enough people paying those mortgages the way they are supposed to.
Incidentally, that "implosion" happened just one year ago! Sunday, September 07, 2008 was the day the government took over Fannie and Freddie and over Five Trillion Dollars in loans they had outstanding. Within a week or so, the whole mess with AIG Insurance [not exactly a Rater, but they insured the bundles], Merrill Lynch, and, of course, Lehman Brothers [who the government decided to let completely fail] began to fall like a row of dominos!
Believe me, it ain't quite that simple, there are a lot more factors involved, but that is my general concept about what happened to our economy.
Wait a minute! Weren't we talking about YOUR MORTGAGE?
You were not like those other buyers, so what is the problem? You and Your Spouse each had steady jobs with both kids in good schools; You bought into that new subdivision early so You got a price below the suggested $300,000 retail; the mortgage is a six percent fixed rate for thirty years; eight months after you bought Your home it was valued at $420,000; and You did NOT refinance! So what is the problem for You?
Well, now it is 2009, and prices have plummeted! Three of the houses on Your block were purchased by investors from other states who quit paying their mortgages, the AeroSpace/Auto Parts Manufacturer/Ethanol Plant/Gambling Casino/You-Name-It closed and five families are out of work, and one homeowner got paralyzed in an accident with a DUI who had no assets or insurance. Does that homeowner have excessive Medical Bills?
Your Spouse had a great, steady government job yet lost it thanks to the Reduced Tourist Tax/Property Tax/Sales Tax/Income Tax or even the Fish and Wild Life License Tax Revenues. The wonderful home You had so thoughtfully purchased is now in a neighborhood where nine of the twenty houses on YOUR BLOCK are in foreclosure with algae/mosquitoes in the swimming pools and Your joint income has been cut in half. Now What?
Simple, lets go back to the FUNI Bank and see what we can work out, okay? You take Your mortgage papers with You and the Loan Manager at the FUNI Bank reminds You that Your payment doesn't go there anymore, it goes to a handling company on the other coast.
WHERE IS YOUR MORTGAGE?
It turns out that the FUNI Bank sold that mortgage to Fannie or Freddie who combined it with a thousand others and sold portions of that bundle to approximately twenty three separate companies, retirement funds, and countries.
A certain percentage of those One Thousand and One mortgages were placed with Janitors and Hotel Maids who claimed to have six figure incomes, with people with good real incomes who were within three years of retirement [or being laid off], and even a few unemployed people who simply claimed, and signed papers so stating, that they were making $87,000 a year!
Again, as an aside, those Mortgagees I spoke of were all people who should not have gotten a mortgage, but were accepted anyway. There is another side to the story. Sam and Sarah went to FUNI Bank, also. The home they wanted was smaller and cheaper. They had real jobs, let's say as carpenters, cashiers, nurses or factory workers, with a Credit Score of 705, and had a history of trusting professionals to answer their questions honestly.
For instance, they used Plumbers, Heating/AC Contractors, Doctors, Pharmacists, and others on a regular basis. When they went to the same FUNI Bank they had been going to for years, where their checking, savings, and a credit card account were held, they trusted the Loan Officer who helped them with their home loan mortgage and they did not fax it to an Attorney to review it for them.
They agreed that $600 per month, plus Taxes and Insurance would fit within their budget and signed everything, thanking the Loan Officer nicely.
TWELVE MONTHS LATER, they received notice that the mortgage payment would be going up to $850 plus T&I, or whatever, because the loan officer [who no longer worked at FUNI Bank] did NOT tell them that the mortgage was not quite as simple as it looked. He/She got a nice bonus for placing them into a Graduated Mortgage [or escalating ARM, Adjustable Rate Mortgage] with increasing payments, interest rates, and probably some cute little extra fees.
Their moral trust was used to rip them off, but they had signed all the paperwork and had no proof of the lies they had been told.
That type of theft happened much more frequently than we hear about!
Back to the Bundle! That particular bundle of mortgages had gone to the Ratings Company who hemmed and hawed and said it looked like a good old fashioned A+ rated bundle, didn't it?
The person who actually handled that bundle had only been on the job for two months, since she had been the secretary for the guy who had jumped to a bigger Ratings Company for bigger bonuses! The Raters were very busy, no replacement had yet been hired, and she knew how to stamp papers in the right places, didn't she? So she kept doing the proper paperwork without the deeper understanding of what this really involved. Great supervision, right?
Therefore, when You go to FUNI Bank and ask them to trace Your mortgage, they have no idea of how to do it! It has gone through too many companies, government agencies, bundlers, and assorted brokers. Asking Michael, Michelle, and the other 7062 employees from twenty seven multi-state companies, whose 401K mutual fund shares hold one/five hundredth piece of Your Mortgage, to agree to a reduction of Your interest rate is not exactly easy to do.
WHAT CAN I DO?
So, to sum this up, "Can anybody repair My Mortgage?" is not the real question. The real question is "How do I find somebody who:
A. Knows how to negotiate with the right people,
B. Will take the time to do so for a reasonable price, and
C. Will even care if it gets fixed?"
What if there were ways for You to fix Your own mortgage?
Do You think that You would care more about making sure that every step was done completely and correctly? The person with the most vested interest in a successful loan modification is You, the actual homeowner.
There is legitimate Foreclosure Modification or Mortgage Modification for people in Your circumstances! You made a home purchase that seemed reasonable but the shrinking economy has changed the whole picture. It is like the dealer started dealing from a different deck, with different rules, yet, so far, no one told You what the new rules are!
Seven important things You need to know include:
A. What a foreclosure is and why Your lender does NOT want to force it.
B. What Your options are; should You stay or should You go?
C. Who do we specifically have to talk to?
D. What Do we Ask Them?
E. Do they understand the situation of our home or business loan?
F. Does our lender know what needs to be done in order to change the terms of the mortgage?
G. How does this affect my taxes?
Nobody claims that the process will be easy, yet because You care enough to take the time to do it correctly, We CAN work Your way through this craziness!