More American’s today are in dire straits when it comes to their mortgages, are either facing foreclosure, are in foreclosure or are having difficulty in making their mortgage loan payments in a timely manner. Because of the mortgage crisis and issues that arose around the mortgage crisis, many homeowners have had no place to turn. Mortgage lenders were typically not lenient with borrowers or showed much empathy as they were in deep water themselves. Therefore provisions for loan modifications were put into practice by The Making Home Affordable Program which was created and established by the Financial Stability Act in 2009. Part of The Making Home Affordable Program was created and called the Home Affordable Modification Program which assisted those struggling financially that were on the brink of foreclosure. Today, over one-hundred ten renowned lenders have teamed up with The Making Home Affordable Program and work with potential applicants deciding if they qualify for the loan modification program.

So what is a loan modification? A loan modification simply means that the mortgage loan is modified outside the original terms of the contract been the mortgagor and the mortgagee. Loan modifications offer different types of modifications to include: changes in the terms of the loan, reducing the principal amount of the loan, lower monthly mortgage payments or interest rate, lengthening the terms of the loan, and reduce penalties. The loan modification program does not discriminate based on the status of the mortgage therefore at the time a borrower applies for a loan modification, mortgagees can be either current with their mortgage payments, late, in default and even in foreclosure.

Who qualifies for the Home Affordable Modification Program? There are several prerequisites and eligibility requirements for those who seek to modify their mortgage loan through the Home Affordable Modification Program: loans must have originated on or before January 1st of 2009, first lien loans on owner occupied residences must have an unpaid principal balance of $729,750, all potential borrowers must document their income and sign an affidavit of financial hardship, property owner verification will be verified, and modifications can only be done once until December 31st of 2012.

The Making Home Affordable Program is a compliant and legitimate program offered through the U.S. Goverment; however there are warnings and scams to take heed to. After the crash of the mortgage crisis, many mortgage companies created separate divisions calling them ‘mortgage foreclosure rescue services’ which promised borrowers that they would work on their behalf (for quite a fee, no less) to beg and plea with their lender to modify the loan. Many desperate borrows have fallen for this trap, as the Home Affordable Modification Program would never operate as such. Borrowers must be aware of the several modification scams that are ravaging throughout the country, and borrowers must beware. It’s imperative to remember that scammers offer false promises and often tell the borrower to stop making mortgage payments to their lender as they will become the liaison between the mortgagor and mortgagee. In addition scammers ask for fees upfront requesting that they be wired or mailed overnight and only accept payment through a cashier’s check or money order.

The U.S. Government hosts a number of resources at no charge offering homeowners the tools that they need to get for more information on loan modifications through The Making Home Affordable Program. HUD.gov and HUG.org are excellent sites to obtain the information with HUD approved counselors available by phone as well to answer any questions.

Education on the home loan modification process is truly the key when researching options. With the vast amount of resources provided to borrowers through their lenders and The Making Home Affordable Program, many have been able to keep their homes by modifying their mortgage loans, saving them from foreclosure.

As foreclosure rates continue to climb, reports of fraud schemes aimed at homeowners facing foreclosure are increasing. Authorities are warning homeowners to be aware of some of the new scams being played out upon unwary victims during some of their most vulnerable times. Taking advantage of a desperate situation, scammers appear concerned and helpful however their ultimate goal is to steal the home’s equity.  These “Rescue Scammers” all operate differently and methods vary, but generally most of the scams fit into 3 categories:

Sale-Leaseback Schemes – The scammer presents themselves as a savvy investor with a desire to help families in need.  The scammer offers to buy the house, bring the mortgage up to date, and let the homeowner rent back the house indefinitely with the intention of buying back the home. Preying upon a family’s basic desire to remain within their house, these “investors” convince homeowners to sell the homes far below what the home is worth. The home is never rented back to the family; it is usually flipped with the investor vanishing.

Charging High Fees For Little or No Service– In this situation a scammer will pose as a legitimate foreclosure consultant, oftentimes as a mortgage or financial broker. Exploiting the complexity of a foreclosure or refinancing, the scammer operates off of the assumption that the average homeowner is hesitant to handle mortgage matters themselves for fear of making a mistake or by simply assuming they wouldn’t understand it. The scammer locks the homeowner into a yearly contract and charges exorbitant fees for services the homeowner could have easily done himself or herself. You can avoid this by following a very simple rule: Legitimate foreclosure consultants do not seek you out, you have to go to them. If they are contacting you there may be reason for suspicion.

Stealing The Home – Undoubtedly every homeowner’s worst nightmare, but it happens, and oftentimes to otherwise wary and intelligent people who let their guard down during desperate situations. In these schemes, the foreclosure scammer gets the homeowner to surrender ownership of the home usually through outright deceit and trickery. In many reported cases, the homeowner believed that they were signing new mortgage loan documents, when in fact they signed over their homes. In some cases of flagrant criminality, scammers simply forged the homeowner’s signature on documents, counting on the fact that the average homeowner does not pay enough attention to their foreclosure proceedings, and will notice only when it is too late.

The companies and individuals who scam people are experts in gaining trust. They are often smooth talkers, keenly aware of a homeowner’s desperation. They will either call you, send a mail item or e-mail, or may actually come to the house in person.  If you are having financial difficulties, or are about to go into foreclosure, make sure you deal solely with your lender as soon as the problems start. Lenders would prefer that you stay within your home and will work with you, as well as recommending the proper and certified consulting you may need.

One thing that will be of benefit to you is having a reputable Realtor working with you and advising you while you are working with your lender for a solution. Though they are not legal counsel, they are often very experienced with foreclosure proceedings. If you trust your Realtor (and you should, otherwise don’t work with them!) they can be an invaluable source of information and informal advice.  An experienced Realtor knows the process and will help you find the right solution.

About the Author: Let Taft Street Realty be your professional guide to Hudson Valley real estate. Check their website to view all Ulster County community listings, including real estate in Stone Ridge NY.

Selecting a lender may seem like a daunting task, but it is an undertaking that should not be taken lightly. There is a lot more to selecting the right lender than acquiring the lowest interest rate or the lowest mortgage payment.

So how is one to choose the best lender? A good place to start when beginning your search for the perfect lender is to ask around. A few of the best resources are your professional real estate agent, friends, or co-workers who have recently purchased a home through financing. Contact the lenders who are recommended, choose the lenders that have good reputations, excellent track records, display a high level of competency and are always in communication with you, the borrower. Do your homework, research and review their terms of service, and look and see if that lender has a program that meets your needs and has a track record of actually bringing funds to the table on time so that transactions close.

Once you find a lender that fits your criteria, the next step is in understanding why it is important to select the best lender. Well for one, by getting pre-approval for a home mortgage by a reputable lender, your offer becomes more attractive to the seller. If for example, you as the borrower were to choose an inept or “shady” lender then both the listing agent and the seller may be concerned with your financial resources and situation.  In addition, choosing a lender that is not dependable or experienced can cause major issues in regards to closing, i.e. funds were not received in time for closing after the lender assured all parties involved that the funds would be received in a timely manner, dramatically higher closing costs at closing not disclosed prior to the borrower on the ‘Good Faith Estimate’, lender does not return calls especially when it is the day of closing, lender changing the terms of the loan and not notifying the borrower until the day of closing. These are all frightening examples of how imperative it is to get all the facts when selecting the best lender.

Understand the difference between a mortgage lender and a mortgage broker. Mortgage lenders work for a bank or other financial lending institutions, are employees of these institutions who work to sell and process mortgage loans. As a borrower, the lender will take your application and will work to find the loan that meets your requirements. Once approved, the lender will take you from the purchase of your home through the closing process.  Mortgage brokers are more like free agents. They are paid a fee to work towards the real estate transaction and work with hundreds of lenders, finding homebuyers and determining the best mortgage for them based on their credit situation. Mortgage brokers can usually find mortgage loans for any type of credit.

Does it make a difference? Know the differences. If a borrower is looking to purchase out-of-state, then a local mortgage broker may assist in finding a lender in another part of the country. A local mortgage lender may not, particularly if it is a small bank that does not have a local branch in the part of the country a borrower is looking to purchase in.  Mortgage brokers can also find a lender that will make a loan when a local bank has turned down a loan.

Remember that knowledge is power. By doing your homework in selecting the perfect lender, and understanding your choices and options whether it be with a mortgage lender or mortgage broker, you will find a true professional, one that provides the level of service that you expect, who treats you as a valued customer, and can bring funds to the closing table.

What is an FHA Loan?

Before delving into the Pros and Cons of going FHA, it is imperative to understand fully what the FHA is. The FHA was created in the early 1930’s during the Great Depression by the National Housing Act of 1934. During the depression, foreclosures and defaults spiked tremendously therefore it was designed primarily to increase home production and reduce unemployment, and is in charge of numerous programs to promote home ownership. The FHA does not make loans; FHA loans are insured loans made by private lenders obtained with the help of the FHA and are backed by the United States Government. FHA insured loans allow lower income Americans to borrow money that they otherwise would have to purchase a home. With a small down payment, buyers can purchase a home. Although FHA loans make it easier for people to qualify for a mortgage, they’re not for everybody.

The Pros of Going with FHA Financing

Typically almost anybody can get an FHA loan and makes home ownership a reality to many buyers, especially in today’s economy. Here’s why:

• Credit does not have to be stellar
• Flexible income guidelines
• No prepayment penalties
• Allow to purchase with a small down payment as small as 3.5%, when other lenders require higher down payments
• Up to 6% Seller Assistance
• Some programs offer no down payment
• Low closing costs
• May be assumable
• Leniency during financial hardship
• Fixed rate payments for 15 or 30 years
• Loans that cover fixer-upper purchases to include all repair/remodel costs
• Help for Seniors with reverse mortgage option
• Programs available for refinancing

The Cons of Going with FHA Financing
There are a few disadvantages to FHA loans, however:

• Credit must be established
• They are conservative loans; lower loan amounts which means you borrow less
• Strict mortgage insurance guidelines-have to pay private mortgage insurance called PMI
• Are designed for the longer-term home buyer and don’t have the variety that non-FHA loans have
• No down payment loans require borrows to have excellent credit and larger incomes
• Appraisal guidelines may be stringent
• Because FHA is backed by the US Government, it may take longer to process the loan as opposed to conventional mortgages

The bottom line is this: if you are looking for a mortgage with a low or no down payment or if your credit is not up-to-par then an FHA loan is most likely the way to go. If you have exceptional credit and a larger down payment, then a conforming loan would not be your best option. Whatever the case may be and most importantly, educate yourself to find out the best program that will suit you. After all, buying a home is the largest and most significant purchase you will make in your lifetime.