Many mortgage professionals are advising their clients not to wait to refinance. Obama Administration’s “Making Home Affordable Refinance” program will not last and stricter loan underwriting along with market price fluctuations could result in some homeowners becoming ineligible.
Refinances also are taking longer to complete. A refinance used to take three weeks and is now taking up to six weeks.
As unemployment rises in many states, more homeowners are finding it difficult to pay their mortgage each month. Although most unemployed homeowners do not qualify for refinancing, as they do not meet the minimum qualifying requirements such as proof of income, there are steps they can take to improve their chances of a successful refinance.
The first and probably most important step in the refinance process is to find out which company services the loan. The loan servicer may or not be the company where the mortgage payment is sent each month. This step is crucial, because the loan servicer is generally the one that can modify the loan. If the loan servicer is not able to provide assistance, the owner of the mortgage may be able to help.
Once a homeowner realizes he or she may no longer be able to pay the mortgage, the homeowner should contact the “loss mitigation department” of the lender. The “loss mitigation department” is where the refinance and/or loan modification process begins.
After discussing options with the loss mitigation department, homeowners should write a forbearance letter, also know as a postponement of payment letter. This letter is sent to the servicer or lender and details the homeowner’s current financial situation and hardship.
Many government agencies and nonprofit organization provide free services to homeowners and will serve as an intermediary between the lender/servicer and the homeowner. Some companies charge fees for the same services. Housing analysts caution homeowners to conduct research and due diligence prior to paying a company for loan modification and/or refinance assistance.
Just realizing there is help for homeowners in this market should put to rest some of the horror stories being used for other providers.
Information courtesy of California Association of Realtors.
