Our Melbourne Florida Foreclosure Attorney has helped countless Brevard County residents obtain mortgage modifications for their homes, reducing their mortgage payments to a more affordable payment. This post is the second in a series of posts to help homeowners learn about the available modification programs so they can better tailor their applications to saitsfy their lenders' requirements.
If you are facing foreclosure, you are advised to contact your foreclosure attorney immediately, even if you are applying for a modificaiton. Submitting your mortgage modification application will not stop the foreclosure process. You are still in danager of losing your home. If you do not have a foreclosure defense attorney, contact us today for a free consultation to discuss your case with a foreclosure attorney in Melbourne, Florida.
In-House Modifications:
As stated in my last post, every lender has In-House modification options that are outside of the federal government’s HAMP program. It should be of no shock that these In-House modifications rest on more financially sound underwriting practices than does the federal government’s HAMP program. As stated above, the HAMP program looks only at Gross Income, with no regard to take home pay or expenses. In-House modifications, on the other hand, compare your Net take home pay with your monthly expenses (including your regular monthly mortgage payment) to see how much money you have left over every month. If after deducting all of your monthly expenses you show too large of a monthly surplus, your lender will assume you can afford your current monthly mortgage payment and will not reduce your mortgage payment. If on the other hand you show too much of a deficit every month, the bank may feel that a modification is futile, since you may not be able to afford even a reduced monthly payment. If that’s the case, they will feel it’s a waste of time and resources to underwrite a modified mortgage. Successfully modifying your mortgage through the In-House option requires a delicate balance between not having too much money left over every month, and not having too little.
Rule of Thumb for In-House Modifications.
Although the lenders will never divulge where you need to fall on this income v. expense spectrum, we do offer what we find to be a good rule of thumb. In our experience, the most successful modification applications are those that indicate the homeowner is just breaking even every month. Remember, this is a rule of thumb, a rough guideline. It doesn’t mean you can’t have a little extra every month or show a little deficit every month. But you want to be mindful of not going to the extreme on either side of the spectrum.
We are not giving you this rule of thumb as a means of falsifying your financial disclosures in your mortgage application. To the contrary, it is critical that you are completely truthful in your disclosures. The fact is, most people in this country live paycheck to paycheck and are just breaking even every month. It’s just how we live. So most people do not need to falsify their financial disclosure to show their lender they are breaking even. What we want to help you avoid is the tendency some people have to inflate their expenses to show their lender that they are really broke, thinking that this will help show the need for a modification. What the homeowner is unwittingly doing is showing their lender that a modification is futile and that going through the underwriting process is waste of time and money.
We also want to help you avoid the tendency that other homeowners have in not accounting for all their expenses. Although most Americans live paycheck to paycheck, those same people are often pretty bad at calculating their budget because they do not account for all their true expenses. We have seen many modification applications that indicate that the homeowner has a substantial surplus every month, when we know that is not the case. The problem in those cases is that the homeowner did not think through all of their expenses, making it look like they had more money left over every month than they actually did. With so much reported income left over every month, the lender doesn't see the actual hardship, and will often deny the modificaiton for that reason.
The lesson to take from our rule of thumb is this - when you fill out your financial disclosures, make sure the amount left over actually reflects reality. If your disclosures show that you have $500 left over every month, and you know you don’t actually have that much left over every month, then you probably missed or underestimated an expense. If you are showing that you are negative $500 every month when you know that you are not, then you probably overestimated an expense. If after disclosing your income and expenses you show that you are breaking even, you are right in line with the majority of Americans and have probably accurately accounted for you actual expenses.
If there has been a loss of job or substantial reduction or increase in income or expenses since obtaining the mortgage loan, you may not be just breaking even every month. You may be way negative or way positive every month. In either case, you still want to make full and accurate disclosure of your finances. At the end of the day, we never know for sure what your lender will approve. You may be surprised.
Bowin Law Group - Brevard's Hometown Law Group