What do lenders approve for loan modification by kii99990


									B   SEPTEMBER 25-OCTOBER 1, 2009 • NORCAL ASIAN JOURNAL   Community Journal                                              http://www.asianjournal.com • (650) 583-6818

                                                                                                     What do lenders approve

                                                                                                     for loan modification?
                                                                                                     which is available to the bank if      Banks that reduce principal may
                                                                                                     they actually modified your loan.      give up to 20 percent reduction
                                                                                                     The government reimbursed the          in principal depending on how
                                                                                                     bank for a fraction of the loss        much the property is underwater.
                                                                                                     actually incurred by the bank in       Some banks forgive any missed
                                                                 Atty. Crispin LozAno                modifying your loan. The incen-        payments of principal and inter-
                                                                                                     tive is about 50 percent of the to-    est incurred before the date of
                                                                 Question: Are lenders re-           tal loss. The other 50 percent is      loan modification. Some banks
                                                              quired to modify my mortgage?          absorbed by the bank.                  added the missed payments but
                                                                 Answer: No. Loan modifica-             Question: Are banks required        not the late fees to the balance of
                                                              tion is voluntary on the part of       to modify my loan based on 31          the principal. Banks usually give
                                                              the lenders. The bank will ana-        percent of my gross income as          borrowers some time before the
                                                              lyze your financial capability to      stated in the obama plan?              start of the first payment on the
                                                              continue paying the loan once             Answer: Again, the banks are        loan as modified.
                                                              it is modified. They also review       not required to follow the Obama          Question: How much interest
                                                              your hardship to justify modify-       plan to the letter. They have their    reduction do banks allow?
                                                              ing your loan. Before modifying        own guidelines in loan modifica-          Answer: It depends on the
                                                              a loan, many banks offer a trial       tion. Most mortgages are owned         bank and your particular situa-
                                                              forbearance of three months be-        by institutional or private inves-     tion. For example, some banks
                                                              fore offering loan modification.       tors. The banks are only acting        offered interest only for the first
                                                              The reason is they want to be          as servicer or agent. If they be-      five years and on the sixth year
                                                              sure that you can still pay your       lieve they will incur lower losses     a higher interest with princi-
                                                              mortgage once it is modified.          in foreclosing your property they      pal and interest payment. The
                                                                 Question: Why did the banks         have the option to do so.              range of interest offered by the
                                                              get bailout money and yet they            Question: Are banks required        bank is between 2.8 percent to
                                                              do not want to modify my loan?         to lower the principal balance of      4.5 percent interest for the first
                                                                 Answer:     The    first  bail-     my loan?                               few years of the loan modifica-
                                                              out money is called “TARF”                Answer: Many banks do not           tion. After about five years the
                                                              which is a form of loan to the         reduce principal balance. They         rate goes up to about 6.5 percent
                                                              bank to survive their lack of li-      only give reduction in interest. A     with payment of principal and
                                                              quidity, and it has nothing to do      few banks give principal reduc-        interest.
                                                              with loan modification. The other      tion, but it is not based on cur-         Question: Why are there ad-
                                                              program is called “incentive”          rent market value of the property.                                PAGE B5

                                                                     LEGaL RIGHTS                    Dangers of ‘Predatory Lending’
                                                                                                     have worked secretly together          people still want to scam you out
                                                                                                     for years creating false promises      of your money even when you’re
                                                                                                     deep in the game of deception.         dealing with something so impor-
                                                                                                     And once they have your signa-         tant to your family’s future.
                                                                                                     ture on paper, the helpless bor-          Predatory lending is conduct-
                                                                                                     rower might as well play the part      ed in several ways. For starters,
                                                                                                     of the man or woman who sold           lenders use the old-fashioned
                                                                                                     their soul to the devil.               trick of baiting consumers into
                                                                Atty. Johnson LAzAro                    The current mortgage crisis         signing documents before they
                                                                                                     has been heavily documented in         thoroughly understand all the
                                                                 WRITeR William Hazlitt once         the media, but did you know that       minor details. Brokers and real
                                                              said, “Life is the art of being well   29 percent of the total households     estate agents collaborate to make
                                                              deceived; and in order that the        in the United States face a risk of    false promises and help trick con-
                                                              deception may succeed it must be       foreclosure within the next three      sumers into signing voluminous
                                                              habitual and uninterrupted.”           years? That’s nearly one-third of      loan documents before they can
                                                                 What is deception? The dic-         all the homes in the nation. The       calculate the math and figure out
                                                              tionary defines deception as “the      alarming statistic is proof that the   whether they can afford the loan
                                                              act of deceiving or something that     current mortgage situation is not      or not.
                                                              deceives.” Perhaps better known        a crisis but a major epidemic.            Loan amounts are generally
                                                              to the public is the story about          Unfortunately, a lack of knowl-     based on the borrower’s home
                                                              a man who sells his soul to the        edge is the primary reason for 60      equity with consideration to the
                                                              devil in exchange for a life filled    percent of foreclosures. The bor-      borrower’s ability to make sched-
                                                              with false hope and riches. It’s a     rower and lender simply do not         uled payments. Sometimes the
                                                              classic short story about how far      engage in enough communica-            financial resources are intention-
                                                              people are willing to go to enjoy      tion, which is sometimes inten-        ally misstated by the broker just
                                                              success and fame.                      tional and sometimes not by the        to make a sale. The broker is well
                                                                 What the general public may         lender.                                aware of the family’s income and
                                                              not realize about that story is how       Predatory lending is an unethi-     also understands it does little to
                                                              much it really applies to the cur-     cal way for lenders to sign aspir-     prove if they can really afford
                                                              rent market of mortgages. While        ing homeowners to loans the            the loan or not. But it holds little
                                                              it’s never fair to label anyone the    lenders know they cannot afford.       weight on the broker’s shoulders,
                                                              devil, some lenders and brokers        It’s unfortunate to admit that                                    PAGE B6

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