Some guidance on mortgage arrears
Some guidance on mortgage arrears
Three basic rules
?Rule 1. communicate, communicate, communicate,
?Nothing antagonises or puts a lander off more than a lack of communication with a borrower who is in difficulty. If you realise you're in trouble talk to your lender. He won't bite your nose off. It is much in the lender's interest to sort out your arrears problem as it is for you. In the United Kingdom the legislative background emphasises that repossession is the last resort only when all other options have been exhausted.
?Rule two the sooner you take action, the more options you will have.
?This is why it is critical to raise your head above the parapet and ask for help as soon as it looks like you might have trouble making a payment. Do not be embarrassed or afraid to call your lender. You will not be the first borrower the lender has encountered in trouble making payments. .
?The first response from many people who are experiencing financial difficulties is to ignore the problem and hope for a miracle. Unfortunately, miracles are a rarity. Nothing good happens with this approach?
When you are open and honest with your lender about what is happening and why it is happening you will find that your lender will respond by trying to help you. IIn fact, the lender may be able to resolve your issue over the phone. There might be some paperwork involved but sometimes a phone call is all it takes to resolve your situation. the most common options are:
?Currently, there is additional protection agreed between the government and the lenders, commonly referred to as the Mortgage Charter. (a copy can be downloaded from the documents section of my website.https://my-home-arrears.co.uk)
?In some cases, your lender won't have any options for you or suggestions for ways to help. Often at this point it is external intervention from consultants such as myself which may result in agreements or appropriate solutions.
Rule three. exhaust all the? options before you let your property go to repossession.
?Tthe damage to your credit score if a property goes to repossession is significant and may? prevent you from getting another mortgage for years (usually six years). A shortfall sale is slightly less damaging to your credit score and you won't need to wait as long before you can get another mortgage (usually two to three years).
?A loan modification does no damage to your credit score, Iit just changes the terms of the original mortgage and replaces it with a new set of terms (payment reschedule, interest only etc).
?A payment holiday might sound like a great idea these days but everything is not as it appears. on the surface, skipping a year's worth of mortgage payments and having them tackedtaccked onto the end of your 30-year mortgage as a 31will year might sound like a great deal but consider the interest implications. The good news is that you can bring your? forbearance by making payments again. After a few months of making payments, you should be able to qualify for a new mortgage or refinance assuming you meet all the other financial requirements. you will have to contact your loan provider if your loan is in forbearance and you wish to resume mortgage payments so they can update their system.
Other options include:
I recommend that you avoid sales to investors for the very reason that they are investors. They seek to buy properties at the lowest possible price to maximise their profit. What is fair to you and what is fair to them may be two different things. They will attempt to increase their margins by convincing you to accept an offer that is less than the true market value of your property.?
Nobody ever plans to get themselves into a tough financial situation, but it happens . Avoid becoming emotionally attached to your property. It is important to know your options and to take decisive? action as soon as you sense there might be some trouble.?
What is a loan modification?
?Loan modifications in the context of distressed housing are tools that lenders can use to save mortgages from defaulting. Loan modifications help both the borrower and the lender find a compromise for both of their benefitsbenefit. The borrowers get to keep their property and the lender gets to keep the stream of monthly payments for the duration of the mortgage.
A loan modification is different from a mortgage refinance. A loan modification changes the terms of the original loan with the lander.Lenders do this when borrowers are experiencing financial hardship that would cause them to default if the mortgage kept its original terms. Tthe loan modification alters the terms to make the mortgage affordable for the borrower.
?A refinance is when the original mortgage loan is replaced with an entirely new loan. Thethe new loan takes the place of the original loan and pays the remaining balances on the original mortgage. The new mortgage is subject to its own terms that have nothing to do with the previous mortgage.
?A loan modification is a true win-win and will not have a negative effect on borrowers credit scores. Like all distressed housing situations, the best move is to contact your lender at the first sign of trouble. lender's want to help and they have many resources at their disposal.
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?Not all loan? modifications are processed the same way. Tthere are different ways to modify a loan. As mentioned earlier the most common loan modification strategies are:
?What is forbearance?
?llenders have been making use of a tool in response to the covid-19 pandemic called forbearance. A forbearance is a temporary pause in mortgage payments/the payments that would normally be due today are added to the Future payments schedule with no penalties to the borrower (other than the interest that continues to accrue). There are also forbearance options where partial payments can be made, or industry only payments can be made for a specified period of time for a stop.
The process is less formal than a loan modification and can usually be completed with a phone call to a lender and Few Quick signatures confirming the change.
About lawn modifications
Who is eligible for a loan modification?
?Loan modification requests are evaluated on a case by case basis. If lenders can keep a borrower in a home by altering the terms of the loan, that solution is always favoured over a shortfall sale or a? repossession..
?Most lenders will require evidence of legitimate hardship before approving a loan modification.?
Does a loan modification damage my credit?
Not in most cases, although the missed payments that often lead to a loan modification are damaging to your credit score Fortunately. most lenders do not require you to be late with mortgage payments before they can discuss a loan modification with you. In the aftermath of the 2008 crash, most lenders would require you to be late with payments before they would speak with you about a modification. Those late payments were damaging to credit scores back then..
?What are the reasons a lender would deny a loom modification request?
?How long does the loan modification process take?
Three to four weeks is typical. The usual delaying event is a gathering up of the information which the lender requires to make an informed decision.
?Why does a lender prefer a loan modification to a repossession?
?Llenders do not want to repossess properties. Indeed theMCOB (Mortgage Conduct of Business)rules stipulate that repossession must be a last resort when all other avenues have been explored.
?Should I use a loan modification specialist or a company that would handle the process for me?
No. The best case scenario with a third Party is you will pay someone to do what you can do yourself . The worst case scenario is you walk into some sort of scam and have to start from scratch with your lender, assuming it's not too late!
?Since the 2008 property crash all sorts of repossession rescue types of outfits appeared. Some of them were well qualified and could help people avoid repossessions, but many of them were bad players. Some of them simply over-promised what they could deliver, and some of them were outright frauds..
?The fastest and easiest way to get a loan modification is to contact your lender and discuss your options. there's no need to add extra complexity with a third party.
?In the odd cases where a borrower may not be able to speak with a lender due to proximity or medical reasons, a letter of authorization or power of attorney would do the trick, using someone who has either been recommended to you or who has provided strong references? A competent lawyer can help draft the requisite power of attorney.
For help with arrears, shortfall agreements or arrears issues please visit my website https://my-home-arrears.co.uk
Ben Clarke LL.M.