Questions are circulating about loan modifications in the Indianapolis real estate market. Since a number of Indianapolis homeowners find themselves in a quandary about paying their mortgages on time, or at all, they are seeking information about mortgage options and loan modification criteria.
Mortgages and real estate financing are already confusing topics for a lot of people. Add in all of the problems with our economy and the subsequent changing of loan modification criteria rules and some homeowners just want to give up rather than even try to understand it.
Loan modifications are the hottest way right now in trying to keep United States homeowners from having to foreclose on their homes. It has been so important to the Obama Administration that they began their own modification initiative called Making Homes Affordable. Indiana also has their own program as well called the Indiana Foreclosure Prevention Network. Both programs promote counseling at no cost and education to avoid loan modification scams.
Basically the goal of any loan modification program is to help homeowners stay in their current residences and avoid financial devastation, which will further decline our economy.
Closely in line with that goal is to protect consumers from loan modification scams who are trying to take advantage of people in a clearly vulnerable position. Striking the balance between opening eligibility and keeping out con artists has been the challenge of creating loan modification criteria. The following are points of current criteria:
Loans need to be conforming jumbo or conventional mortgages began before 1/1/08. The definition of conforming changes so keep on top of those updates as you seek out a modification program.
It used to be that you had to be past due on mortgage payments by three months. This is apparently no longer the case but you need to be able to verify that you are unable to make your payments but could if your loan was modified.
To be modified, your loan must be on a single-unit property and your primary residence.
There needs to be an 80 percent plus MTM loan to value.
The home seeking modification cannot be condemned, abandoned, vacant or in otherwise significant disrepair.
With the goal of modification programs being to reduce payments to the point that they make up 33 percent of the owner’s income per month, programs may do the following as well:
Escrow costs and advances and capitalize interest.
Draw out the length of the mortgage to up to 40 years.
Diminish the interest rate by steps of .125 percent to no fewer than a 3 percent fixed rate. If the rate drops below market then it steps up annually in increments to market rate after five years.
For last ditch efforts, owners will be allowed principal forbearance resulting in a balloon payment.
Because rules change for loan modifications, sometimes on a daily basis, check to make sure these points are still valid when seeking help. Again, free counseling is available through resources like Making Homes Affordable and the Indiana Foreclosure Prevention Network.
A key to qualifying for a loan modification program is being able to prove that you can afford your loan if the payments were reduced. This doesn’t automatically rule you out if you are unemployed but you will have to submit other proof of income or that you will be employed soon.
If all else fails and you feel you have no choice but to sell your home, check with a local Indianapolis REALTOR® about listing your home among the various Indianapolis homes for sale. Ask about your foreclosure options, such as a short sale.