[img]1503|left|M. Kamionski||no_popup[/img]Might you be interested in a mortgage loan modification? A new program for loan modifications for homeowners may be of interest to you. Last Feb. 9, the Dept. of Justice announced that it and 49 State Attorneys’ offices entered into a settlement agreement with the five largest mortgage servicers – Bank of America, Chase, Citigroup, GMAC (now known as Ally Financial) and Wells Fargo.
What does this settlement mean for you? If you have a mortgage with one of these banks, you may now be qualified for a loan modification under this settlement – one that won’t just reduce your payments, but may even reduce your principal balance.
Part of the terms of this settlement is that these lenders will collectively be responsible for approximately $17 billion in consumer relief activities. Of this $17 billion, a minimum of $5 billion in credits must come from modifications to eligible first loans. In order to receive a credit, the servicer will need to enter into a loan modification with an eligible borrower that ends up reducing the principal mortgage rate as well as the total payment and interest. How do you determine whether you are eligible?
The Conditions
1. Your loan must be serviced by one of the five banks mentioned above, or one of their subsidiaries. Individuals whose mortgage is held by other banks will not be able to benefit from this program. Nor will those whose loans are owned by Freddy Mac and Fannie Mae, even if those five banks or their subsidiaries are servicing them.
2. You must be at least 30 days delinquent, or otherwise be at imminent risk of default – and it is difficult to establish that you are in imminent risk of default without being behind. Generally, only a death in the family, a disability, or a divorce will do.
3. Lastly, your loan balance pre-modification must be more than 100 percent of the value of your property – if your house has equity, you are ineligible. What happens if you are eligible?
The loan modification process will be under the standard HAMP loan modification or one of the proprietary or government modification programs, so the process will be very similar to any previous loan modification. The bank will still try and reduce your monthly payment to 31 percent of your income, although now a 10 percent minimum reduction is guaranteed, and the 31 percent figure can be waived if they reduce your payments by 20 percent.
The big change is that, if your total mortgage is more than 120 percent of the value of your property, they must reduce it to no more than 120 percent – and can reduce it further if they want. In other words, a borrower with $300,000 owed on a $200,000 house can expect this or her mortgage to be reduced by at least $60,000 by the bank!
If you believe that you are qualified, it’s best to take the first step – get in touch with the banks, or seek out a qualified attorney to get you started as soon as possible.
Mr. Kamionski has operated a successful solo law practice in Los Angeles for the past 10 years, representing individuals and companies on a variety of civil and criminal matters. He has litigated in federal and state courts in California and serves on several appellate panels. He also practices in Washington, D.C., representing clients on matters before the D.C. Circuit Court of Appeals. He is Of Counsel to Andrew Hale and Associates, the top police defense firm in Chicago, and maintains the firm’s presence in California. He may be contacted at mkamionski@yahoo.com or 818.609.1795.
