IS A MORTGAGE RESTRUCTURE RIGHT FOR YOU?
What is a Mortgage Restructure?
You may have been hearing more about Mortgage Restructure. As millions of homeowners have become loaded with mortgages they have no longer the ability to refinance, there may be only one solution: mortgage restructure.
A Mortgage Restructure, Loan Adjustment or Loan Modification is when the lender of the note restructures the existing mortgage to make it more reasonable. Few Lenders may be willing to decrease the loan amount, interest rate and payments. Each case and scenario is vary and everything is depends on who owns your loan, what your dti and ltv’s are and why you require or are appealing a restructure.
It’s significant to learn yourself on the mortgage markets today as well as how and why a mortgage lender may restructure your mortgage. Is it because they maybe want to eliminate a lawsuit, foreclosure or because it may be financially best for them similar to when a lender refinances a mortgage. It’s actually all of the above. What you should be alert of is that your mortgage provider may be acting like a “debt collector”. Many mortgage lenders today are really a mortgage provider performing on behalf of the owner/investor of your mortgage. More essentially, the servicer’s loyalty and fiduciary duty is to their client; whom is the owner/investor of the loan and Not you (the homeowner). The owner/investor of the loan hires the servicer to collect on a debt and service their asset. So when you are trying to negotiate or processing your own modification or restructure, be aware of this as they will act in their clients best interest because it is their client whom is employing them.
Refinance vs. Restructure
A restructure shouldn’t be distracted with a refinance. With a mortgage refinance, you’re paying off your existing loan with a new mortgage and a new loan amount, interest rate, and monthly payment. A restructure changes the terms of your existing mortgage. Borrowers who choose to refinance aren’t needed to stick with their current lender; they can comparison shop. A mortgage restructure does not change your lender.
Applying for a Mortgage Restructure might be convenient to homeowners who aren’t qualified to refinance.
Each mortgage company, investor and servicer has its own application pocedure that requires borrowers to supply documentation to demonstrate they can afford a restructured mortgage but not everyone will qualify. To raise your changes of getting approved you should strategize and have a game plan or work with a professional who is skilled and knowledgeable of the specific mortgage restructure investor and servicer guidelines as well as consumer protection laws.
A Mortgage Restructure may be an option if:
- You are facing hardship
- You are ineligible to refinance
- You are current or behind on your mortgage.
Mortgage Companies Restructure Loans…
Lenders are open to negotiate when the borrowers have financial instability and don’t have alternative financing options. We will demonstrate to lenders why it is in their interest to work out a new arrangement with you. Lenders will often be willing to decrease the monthly payment amounts, interest rate, and loan term to eliminate foreclosure or legal liability.
Please Beware of Scams
Unfortunately, there are some people who target to wrongly profit off consumers facing hard times by concocting scams related to the mortgage assistance.
Mortgage assistance scams typically relay false commitment of protecting you from foreclosure, and instead, take your money.
Scammers may engage in the following activities:
- Ask you to sign over the title to your home.
- Ask you to pay high upfront fees to start service.
- Guarantee to grant you a loan restructure.
- Ask you to sign paperwork that you don’t understand.
- Request that you begin making mortgage payments to them instead of your lender or servicer.
Some Helpful Tips:
- Don’t pay an advanced fee
- Don’t send your mortgage payments to anyone but your lender (or servicer).
- Don’t fall for official-sounding names, such as the “Federal Assistance Program,” for example.
Parties Involved in Mortgage Servicing
To understand what is a mortgage restructure is, you first must to understand the basic parties involved in mortgage servicing.
Lender or originator
A lender or originator is the party that loaned you the money for your home loan.
Investor
Often, the originator— the real owner of the loan—subsequently sells the loan to a new owner, who is called an investor (can switch from time to time).
Servicer
A servicer is the company that regulates the loan account. The servicer collects and processes the monthly payments, manages the escrow account (if there is one), processes loan modification applications, and supervises the foreclosure procedure when borrowers don’t make their payments. Often, the loan owner also works as the servicer. Other times, the owner sells the right to service the loan to the other company. Your Servicer can also change from time to time as well.
Who or What Are Fannie Mae and Freddie Mac?
The Federal National Mortgage Association (FNMA), also called “Fannie Mae,” and the Federal Home Loan Mortgage Corporation (FHLMC), also called “Freddie Mac,” are government-sponsored enterprises that own or back (guarantee) many mortgages in the United States.
Here’s how Fannie Mae and Freddie Mac play a role in the mortgage market:
A borrower generally takes out a loan to purchase a home from a bank or mortgage company. Most of the time, though, the real lender won’t keep the loan. Instead the lender sells the loan to a bank or investor—like Fannie Mae or Freddie Mac—on what’s ordinarily known as the secondary mortgage market. After purchasing a loan from a bank or mortgage company, Fannie Mae or Freddie Mac either keep the mortgage in their portfolio or package the loan with another loans into mortgage-backed securities, which are then sold to private investors. Fannie Mae and Freddie Mac sometimes guarantee the loans that they sell to investors, which means they make sure that an investor gets paid on the loan even if the borrower defaults.
The New “Flex” Program
This program is the successor to the Home Affordable Modification Program (HAMP), which expired recently. Every lender will have seperate requirements before they’ll consider a restructure.
However, one of the more common mortgage restructure options is the “Flex” launched in October 2017 by government-sponsored enterprises Fannie Mae and Freddie Mac.
Remember: Conventional mortgages pursue guidelines set forth by Fannie Mae and Freddie Mac, and these enterprises often purchase mortgages from lenders, assisting those lenders continue to distribute loans to consumers. You can utilize the loan lookup tools offered by Fannie and Freddie to find out whether one of the enterprises owns your loan, making you eligible for the restructure program.
Eligibility for Flex
To be eligible for Flex , Fannie Mae or Freddie Mac must own your loan. (To find out if either Fannie Mae or Freddie Mac owns your loan, call your mortgage servicer or use the Fannie Mae and Freddie Mac online loan lookup tools.)
Also, you, your home, and your mortgage loan have to meet specific criteria, like:
- the loan must be a conventional first mortgage
- you must have a stable income that will support a monthly payment, and
- you must have taken out your mortgage at least 12 months before being evaluated for a Flex Offer.
The requirements to get this kind of offer are rather wide and complicated, so you may want to consider consulting with a professional third party about how to increase your chances and assist to influence your lenders underwriting for the outcome you are looking for.
What If Fannie Mae or Freddie Mac Doesn’t Own My Loan?
Even if Fannie Mae or Freddie Mac doesn’t own your loan—or if you don’t qualify for Flex for some other reason—you might eligible for another program through your servicer. Investors or Servicers normally offer their own in-house (called “proprietary”) modifications, loan adjustments or loan restructure, as well as forbearance agreements and repayment plans.
Other Programs may be available such as:
FHA-HAMP, VA-HAMP, Proprietary, Streamline, Helping Home Owners, Shared Appreciation “SAM”, Apollo, “In-House” and much more.
To learn about the different options that might be available to you, call us (415) 484-5981