Troubled mortgagors suffer much confusion about the benefit of government loan programs. They toss about to decide which would be best from them. In reality, 90% of the mortgagors should never take such a program because they will fare better by attacking the lender for cheating them in the mortgage deal to begin with.
Here’s the point:
1. If the borrower defaults on a VALID mortgage loan (only 10% are valid in my opinion), through late or missing payments, the borrower ought to lose the house to foreclosure. But the borrower should not leave the house except through selling it, giving its deed to the bank in lieu or foreclosure, or obeying court order to vacate the house. Furthermore they might end up with a Zombie Title – persecution by homeowner associations, county officials, etc for allowing the house to become a danger to the community.
2. If the loan has an invalid nature or the lender injured the borrower through tortious conduct, contract breaches, or legal errors underlying the mortgage, (90% of the situations in my opinion) the borrower ought to fight the lender through negotiated settlement or lawsuit for damages. Doing this skillfully can result in the borrower getting the house free and clear and/or financial compensation (including legal fees and costs).
3. Look at the terms of the typical loan modification to see why it amounts to a scam that cheats the borrower, leaving the borrower owing as much as 3 times the value of the house and facing an impossible balloon payment. Take note that most loans these days are underwater, and the owner can only sell at a loss after 70 months in the house. Do your own arithmetic on this with an amortization calculator.
- This amortization schedule calculator shows the problem with a $250,000 loan at 6% over 20 to 50 years in duration. Take note that on average people stay in a house less than 6 years.
| Years |
Payment |
~ interest as % of first pmt |
70-month interest |
full term interest |
| 20 | $1791 | 71% | $80,160 | $179,859 |
| 30 | $1500 | 83% | $84,124 | $289,595 |
| 40 | $1376 | 91% | $85,797 | $410,256 |
| 50 | $1316 | 95% | $86,604 | $539,607 |
- Spreadsheet program amortization templates
- Microsoft Excel provides a sample template that creates an amortization table
- You can download an amortization table calculator for LibreOffice at http://www.blandisd.net/downloads/libre_office/calc/Amortization.ots
4. Overview all of the government’s Making Homes Affordable (MHA) programs – http://www.makinghomeaffordable.gov (HAMP, 2MP, HARP, UP, PRA, HAFA) here:
- HAMP – Home Affordable Mortgage Program – https://www.hmpadmin.com//portal/programs/fha_hamp.jsp
- watch this simple presentation – https://www.hmpadmin.com/portal/learningcenter/advisors/docs/checkmynpv_presentation.pdf
HARP – Home Affordable Refinance Program – http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx
2MP – 2nd Lien Modification Program – http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/lien_modification.aspx
UP – Home Affordable Unemployment Program – http://www.makinghomeaffordable.gov/programs/unemployed-help/Pages/up.aspx
PRA – Principle Reduction Alternative – http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/pra.aspx
HAFA – Home Affordable Foreclosure Alternatives – http://www.makinghomeaffordable.gov/programs/exit-gracefully/Pages/hafa.aspx
5. Remember that lenders have no obligation to make a worse deal for themselves than the present mortgage gives them. For example, they might modify the loan to give you lower payments, but you will owe a big balloon a few years down the road (which you probably cannot pay) and most of each payment constitutes interest. Furthermore, you have to waive any and all rights to litigate against them for cheating you in the original mortgage.
In summary, a government program puts most borrowers in worse shape than they’d enjoy if they negotiated with or sued the lender for the causes of action underlying the mortgage. To do this, mortgagers MUST procure a competent, comprehensive, professional mortgage examination. For FREE information about such an examination and how to use it to get financial compensation and/or the house free and clear, call me immediately. I do not charge money for this service.
Bob Hurt
727 669 5511
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