The Consumer Bailout That Nobody Knows About

As congress considers the $700 Billion bailout for the financial system, there is a little known "bailout" for home owners that has already been enacted into law, according to Gibran Nichols, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. Section 1403 of the new housing bill that was signed into law on July 30, 2008 (HR 3221) requires mortgage servicers to modify loans for homeowners and help them avoid foreclosures as long as three requirements are met:

A.) Default on the mortgage either has already happened or is "reasonably foreseeable"
B.) The homeowner is living in the property as his or her primary residence.
C.) The lender is likely to recover more through the loan modification or workout than by forcing the homeowner into foreclosure

"The fact is that this law is effective immediately, and most distressed homeowners are simply not aware that they have this option," Nicholas said. Borrowers make their monthly payments to mortgage servicers, and servicers keep a portion of the payment as their profit while sending the rest to the Wall Street investors who actually own the mortgage. "This law requires services to act in the best interest of their investors and obligates them to modify your loan if you can afford the modification loan terms and if they are likely to recover more for their investors by working with you than by going all the way through the foreclosure process." Nicholas said.

While negotiating loan modification with your mortgage lender, it is advisable to follow these four steps:

1.) Make sure you are dealing with your lender's loss mitigation and/or work out department
2.) Write a hardship letter demonstrating job loss, serious medical condition, balloon payment coming due, adjustable rate reset or some other financial calamity that will make it impossible for you to continue making your mortgage payments as scheduled. Unless you are in imminent danger or default as required by this new law, lenders are not likely to work with you.
3.) Send the lender you financial statements, employment records, tax returns and bank statements demonstrating how you would be able to afford the modified loan terms under your present financial circumstances.
4.) Send the lender a current appraisal of your home or some documentation on recent comparable sales in your neighborhood demonstrating the current value of your home. "The key to demonstrating how the lender is likely to recover less money through foreclosure than they would by working with you in your purposed loan modification plan," Nicholas said.


It is advisable that you speak with a professional mortgage consultant. Give us a call! We want to help you!!

By: Artcle written by Paige of RISMedia.com