Your Questions About Save Loan Modification

Helen asks…

My landlord is in Foreclosure – Do I still need to pay the rent?

I live in a rental home that was just served the Foreclosure papers. My landlord has been paying the mortgage for over a year now. I just called a the lawyer and they say I have can stay for another 5 to 6 months. Do I still pay him the monthly rent or can I save the money that I pay to purchase something on my own (which was a goal of mine anyway). What are my legal rights as a tenant?

John answers:

Hello
you have to pay the rent as long as you continues to stay in that house
it depends on the mortgage problems your house owner facing
if you did not pay the rent then you could be evicted and there can be a damage to your credit history
so if you need any further help in my view it`s good to contact the loan modification attorneys they will in help you in a right way in resolving the problem
i hope my answer is of some use to you
best of luck

David asks…

What is a short sale and how long you have to wait to buy another house again?

I heard a short sale in when you can pay or can sell your house for the amount you bought it for… For example I bought my house for $235k and now it cost between $170k to $190k, so it is upside downs for around $60k. I heard that I can hire a realtor he will sell it for a less amount and the rest the bank will “eat it”. But I have to wait certain years to buy another house again. How many years do I have to wait to buy again?

John answers:

As others have mentioned, a short sale occurs when the lender agrees to let you pay less than the actual loan amount when you sell your home. You have the general idea right but it is somewhat more complicated and there are some negative consequences that you should be aware of.

First, if you are not having problems making the payments each month then your lender will probably not allow you to do a short sale. Why would they if they believe that you can keep making the payments on the full loan amount? So, most banks won’t even consider a short sale until you have missed a few payments. These missed payments will show up on your credit report as “lates” and will have a negative effect on your credit score.

Second, the bank may or may not accept the loss which, in your case is around $60,000. While most lenders will not pursue a deficiency judgment they do have the ability to do so in some states. Usually if the mortgage was used to actually purchase the home they will not pursue a deficiency and cannot in CA but if it is a refinance then they can pursue a deficiency judgment by suing you in court. It’s not likely that this will be the case but you should be aware that there is the possibility. When conducting the short sale negotiate with the lender to make sure they are not going to pursue a deficiency.

Third, it is also possible that the IRS will want you to pay taxes on the $60,000 “debt relief”. The IRS sees it as income because it is money that was given to you and you had it at your disposal. There are ways to avoid this tax. There is an “Insolvency Exclusion” that occurs when your liabilities/debts are larger than your assets. If this is the case at the time of sale then it’s possible the IRS will exclude the shortfall ($60,000) from taxation. You definitely need to talk to an experienced accountant or tax attorney about this before the sale occurs as it could save you quite a bit of money and needs to be done correctly.

Lastly, your credit report will be affected negatively by a short sale. While each case is different and no specific numbers are known, the general consensus is that a short sale will cost you 100 points on your credit score and stay on your credit report for anywhere from 18 months to 4 years. However, it is still better than an outright foreclosure which can cost up to 280 points on your credit score and stay on your credit report for up to 10 years.

So, with a short sale it may be possible to purchase another home in a couple of years – depending upon the circumstances. You would have to work on improving your credit over that period of time and you would also be subject to poor loan terms when you do get a loan ie. A higher interest rate and larger down payment.

In the end a short sale is a better alternative than a foreclosure. If you don’t have to sell your home perhaps you should contact your lender to see if they will consider a forbearance or modification of your existing loan terms. If so, then you might be able to lower your payment or skip a few payments until your financially back on your feet.

Good Luck!

Paul asks…

is there another method besides a mortgage modification problem out there?

is there a simpler way of saving one’s house. than to modification cramp.

John answers:

None of the options are easy.

You can do a short sale and sell the house for less than the amount remaining on the loan. That gets you out of trouble but does not save the house. You’d have to get a friend to buy it… Someone who would rent to you.

If you declare bankruptcy, the lender can not take the house. That only helps for a while; then you lose it.

You give the bank a deed in lieu of foreclosure and stay as a tenant. Not what you wanted but you get to stay.

You get a personal loan from family to cover 2 years of payments. If there is inflation, your house goes up in value and you can refinance it and pay them off.

You work 3 jobs just to keep the house.

Robert asks…

What new and wonderful things will Obama do for the citizens of the US in the next 4 years?

Laws, he promised us so much it is really difficult to fathom just how wonderful life will be.

John answers:

He has done a lot for numbskulls like you.

Ended torture of foreign detainees
Health insurance reform ACA
Subsidized 60% of Cobra insurance
Recovered overpayment of SSI benefits
Medicare fraud recovery $5 billion
Home foreclosure loan modification help
Expanded Alaska oil drilling
Approved the XL pipeline project partially
Recovery Act saved first responders jobs
Funding for community medical clinics
Credit card and bank credit card disclosures
Ended gay discrmination in the armed forces
Improved veterans medical benefits
Veterans employment program
School nutrition program by michelle Obama
Improved lower school grades in “Race to the Top”
Saved the largest banks and financial institutions
18 Small Biz income tax credits
2009 tax rebates for families $400-1200
Social Security 2% payroll tax cut
seniors $300 rebate in 2009
Nuclear treaty with Russia
Stronger military presence in the Pacific
Iron Dome missile defense system for Israel
Launching cyber attacks on Iranian nuclear facilities
Killed Osama bin Laden
Deposed the Libyan terrorist Quadaffi
Deportation of 400,000 illegal criminals
Reforming student loan cost
99 Week Extension of unemployment benefits
Campaign against childhood obesity
Consumer financial protection agency
Temporary work permits for undocumented youth
Refunds on health insurance premiums
Saved 1 million auto industry and related jobs
Extradition to U.S. Of Abu Hamza and 5 others
Doubled Dow Jones Index to over 13,000

Charles asks…

How has the bail out affected bankruptcy laws if at all?

I heard that the Govt was trying to adjust the laws concerning BK in regard to homes that are valued for less than owed? Any details, articles to read?

John answers:

I work as a Loan Officer – plus I also work with an attorney firm doing loan modifications.

I heard talk that there was going to be a new FHA secure loan, that people could refinance into a lower rate at 90% of the new appraised value. That was a couple of weeks ago, so far I haven’t heard anything. I have also heard that the lenders have to agree to accept the loss. Realistically for a bank to throw away $1000’s in profit is not rashionable.

You could get an attorney to do a short sale, and sell your home to a friend at a reduced price, or walk away and and give the keys to the bank.

If you file BK – you will save your home, but all you are doing is postponing the debt.

(We had a lady last week that hadn’t made her mortgage payment in five years. She filed BK, and the bankruptcy expired. She wanted to keep her home, our attorneys are negotiating with her lender to reinstate her loan.)

The easiest way is to do a loan modification, where your arrears are restructured into a new loan with your current lender. Depending a your amount owed, the original interest rate, plus how many months you are behind. It is possible to get a lower payment then you originally had.

Every modification is different – everyday I speak to homeowners in your situation. PM me if you have any specific questions….

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