Round 2 of Loan Modifications and Short Sales

Round 2 of Loan Modifications and Short Sales

Loan ModificationsIf we go back and look at the bulk of the loans that were either paid short in a short sale or modified by a HAMP or HAMP-like loan modifications, their vintage was 2005 to 2007. What this means is that loan modifications that fixed some aspect of affordability back in 2008 through 2011 are going to be resetting in 2015. Most HAMP loan mods or proprietary loan mods like the alliance of HOPE NOW mortgage servicers had terms that tiered up over 5 years arriving at an interest rate that is higher than today’s interest rates. In fact over 2 Million Loan Modifications were done in 2010 by HAMP and HOPE NOW. To make matters worse, many of those homeowners had HELOCS on their homes that they took out in 2005 – 2007. They had 10 year interest only periods that are going to start expiring and become 20 year amortizing loans. Some homeowners are going to see another round of hardship in 2015 with this double whammy of HELOC resets and Loan Modifications resetting.

For some Arizona and California homeowners that saw a tremendous increase in value of their home from the all time low, may actually be in a position to refinance both loans into one loan. However, most Arizona and California homeowners will not be able to do this as limits on Loan To Value on refinances have come down to 90% LTV meaning that these homeowners may not be underwater in their home, but are underwater to the guidelines for refinance and the $200 to $600 increase in monthly payments on their modified first mortgage and their interest only HELOC becoming a fixed rate will put them back into financial hardship as it will outpace any pay increases or underemployment that the homeowners still faces.

The plus side is that many servicers have the infrastructure to deal with the increase of loan modifications and short sales that will come in, but they will not have the personnel trained to deal with it as many of these have been laid off over the last year in the downturn of short sales and loan modifications. It will feel like a fight again or at least Round 2 of the fight to keep your home.

With the expiration of the Mortgage Debt Relief Forgiveness Act of 2007 there will be ever greater concern over tax consequences from a debt settlement on a HELOC or Short Sale. Take some time to view a video by McCarthy Law’s Kevin W. Hardin on loan modifications.

If your HELOC is coming due or is resetting and your loan modification is set to reset as well, you may have questions. We can help. Arizona and California have unique deficiency, foreclosure and tax laws you need to understand  while you make decisions to either keep your home or to exit your home. We can help. Click on our link Schedule a Consult to set up an in person or phone consult at no cost to discuss.

About Kevin Hardin

Kevin W. Hardin is a 22 year veteran of the Mortgage and Real Estate industries. He holds a Juris Doctor (JD) degree from Concord Law School and a CMB (Certified Mortgage Banker) from the Mortgage Bankers Association. He is a Senior Loan Officer at HomeStreet Bank. He works with Borrowers, Attorneys, Title Companies, Real Estate Agents and Mortgage Companies on mortgage law issues.

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