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Reader Rick asked:
Hi Gary, my house loan to value is now about 120%. I have a good job and want to save my house, but my payments are just too high. I understand the banks may drop my payments to 31% of my income, which would be a huge help and save me from foreclosure. Is this true and what do I do to hopefully save my house?
- Is your home your primary residence?
- Is the amount you owe on your first mortgage equal to or less than $729,750?
- Are you having trouble paying your mortgage?
For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?
- Did you get your current mortgage before January 1, 2009?
- Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner’s association dues, if applicable) more than 31% of your current gross income?
Note: if you are uncertain, click here to determine
Click Submit. If you answer “No” to any question, you are not eligible for a loan modification. If you answered “Yes” to all five questions, you will be given a list of documents to collect and submit to your lender. You may be eligible for a loan modification. Call your lender. Talk to the lender’s loss mitigation or workout department.
How will the lender decide which option to give you? They will do a Net Present Value Test, which is a college level math calculation. (If you want the details of this test, go to www.FinancialStability.gov for a discussion of the test/calculation works.) The lender makes a business decision. In essence, they determine if they will make more money by modifying your loan and keeping you in the home or by selling your home today via a short sale or foreclosure.
Caution: Do not pay anyone to do a loan modification! Do not pay an upfront fee to anyone! Beware of the many scam artists who are taking advantage of distressed homeowners. Free help is available! Call 1888-995-HOPE or go to www.HUD.GOV/FORECLOSURE.
If you have more questions for Gary Laturno, please leave a comment below or send an e-mail to email@example.com.