What am i suppose to do now that im told i cant get a loan mod, what are my options then? Is there still a chance to stop foreclosure if you are denied the choice of loan modification? The answer is most definitely a yes! Let us look at all your other options to put a stop to mortgage foreclosure if you are not eligible for loan modification:

1) Hardship Letter, hardship letter and hardship letter to stop your foreclosure, this is probably the most-used option after the solution of refinancing. If written properly, the hardship letter could be an extremely useful tool to help your creditors understand of your current financial situation, and obtain their sympathy for you to get back on track in terms of mortgage payments. You could either draft out the letter yourself, or get assistance from a legal professional to help you with the letter. The hardship letter has to be attached with the appropriate supporting documents before you meet your creditors for negotiations.

2) Another option to stop foreclosure now is by asking for a foreclosure court hearing, this is a legitimate and legal way that many undertake in order to stay in your home as your work towards staving off foreclosure proceedings and get your finances under control again. There are normally hundreds of cases waiting to be heard in each circuit court in the country, thus when you file your case, you would be required to wait for a duration of a few months to up to two or three years before your case goes to court. That means plenty of time for you to work on your finances and get back on track in terms of mortgage payments.

3) Locate errors within your Housing Closing Contract, and use them to your advantage to get foreclosure proceedings off your back! You could either run through the documents yourself, or get a lawyer to find the errors for you! But hiring someone would mean having to pay him/ her for the service, thus it is best that you do it yourself (as the errors are fairly easy to locate).

As you can see, there are plenty of ways to stop foreclosure as mentioned above. There are also other ways such as filing for bankruptcy, but only explore this option if all other solutions have been depleted.

Hardship Letter: If you didnt know the real estate market has snowballed into what can only be explained as a major one crisus. With unemployment at its peak and people losing jobs, many are finding it difficult to make mortgage payments.

Hence, as foreclosures have become common the Federal government has come up with a program to help homeowners through this crisus. As part of the program, the homeowners are getting the option of revising troubled loans, first on a trial basis and then on a permanent basis. If the homeowner is able to pay the revised loan for three months, then only he gets the opportunity for permanent modification.

Supprisingly, a large majority homeowners who have signed up for the program have not sent in the necessary documents (including their Hardship Letter). This highlights the problems being faced by the government to stem the tide of foreclosures.

There is a program that allows a borrower to pay interest rate of 2 per cent on loans. The borrower can do it for five years. After three installments of temporary modifications, the borrower has to give some documents including a financial Hardship Letter and proof of income.

Even the lenders have not been able to address the foreclosure crisis effectively. This has drawn the flak of House Financial Services Committee. The program was started in March and since then the banks have modified loans of 680,000 people. The numbers are much less than what the administration had set its goal at – 4 million.

Critics observe that the banks are at fault. There is increased anger at lenders and people are asking Obama to adopt a tougher stance. The Treasury Department’s assistant secretary, Herbert Allison said that the government should have adopted strong measures.

He said that lenders who are doing a good job should be appreciated while those who are not should be publicly spoken against.

The bank officials say that there are many factors responsible for this; miscommunication with clients, misunderstanding about requirements and inability to listen to some borrowers. Such explanations prompted House members to come up with more programs to stem the crisis only time will tell if it works..

Sample Hardship Letter: A loan modification is a change to the loan contract which is agreed to by the lender and the homeowner. The lender modifies the existing loan(s) in order to work with the homeowner because of a hardship. The purpose is to help make the loan(s) more affordable. Usually loan modifications are in the form of a rate reduction and/or fixing the rate for a certain period of time. In the past, loan modifications were only utilized when a borrower was delinquent and suffered a hardship such as a job loss, divorce, or illness.

Now, borrowers can obtain modifications from their lender for unaffordable rate adjustments on adjustable rate mortgages. The earlier the homeowner addresses the issue, the better the chances are of negotiating a fixed rate and a payment that is manageable.

Now, borrowers can obtain modifications from their lender for unaffordable rate adjustments on adjustable rate mortgages. The earlier the homeowner addresses the issue, the better the chances are of negotiating a fixed rate and a payment that is manageable. Sample Hardship Letter

The following are a sample of hardships that get loan modifications approved:

1. Adjustable Rate Mortgage Reset-Payment Shock

2. Illness of the Borrower

3. Illness of a Borrowers Family Member

4. Curtailment of Income

5. Loss of Job

6. Abandonment of Property

7. Property Problem

8. Inability to Sell the Property

9. Inability to Rent the Property

10. Mortgage Servicing Problems

11. Transfer of Ownership Delays

12. Reduced Income

13. Failed Business

14. Job Relocation

15. Death of the Borrower

16. Death of Spouse or Co-Borrower

17. Death in the Family

18. Incarceration

19. Divorce

20. Marital Separation

21. Military Duty

22. Medical Bills

23. Damage to Property (natural disaster or unnatural)

Notice that “My Realtor lied to me” and “My loan officer/broker lied to me” is not on this list. Keep this in mind when you write a hardship letter. Documenting the hardship is very important to the lender’s or servicer’s loss mitigation department and will be verified during the approval process. Without proper documentation, your file may be flagged as fraudulent. You definitely do not want this to happen for obvious reasons and it will slow down the process or terminate the process completely. Sample Hardship Letter

There are two important things to remember about loan modifications:

1. A loan modification should be requested only if no other reasonable options are available and/or the homeowner is experiencing a hardship.

2. Loan modifications are designed for homeowners who can afford their homes but not their loans.

Sample hardship letter: How to Determine if You are a Candidate for a Loan Modification

Lenders and servicers will, in general, look for one thing when you submit a modification request. They look for a documentable hardship of course, but at the end of the day if they decide to grant your request for a loan modification all they really want to know is if you can afford the new payment(s). This is the big secret behind getting a loan modification approved.

There is, however, an art to making loan modifications work. You must disqualify yourself from your old payments and at the same time qualify yourself on a new payment structure. It sounds complicated and it is at first but you will quickly learn important strategies for effectively processing loan modifications.

To understand what the lender or servicer considers qualified, you have to know how lenders calculate your income. The income you can use to qualify for a modification is different from traditional income calculations used to qualify for traditional loans. Moreover, the difference in the qualification guidelines is typically in your favor.

For a modification, you can qualify based on your documentable total household income. As such, you can count income from almost any source: Grandma’s SSI, income from child day care services, from a second job paid under the table, etc. so long as it can be proved. Proof must be in the form of bank statements, 1099’s or in some other documentable form as outlined in the submission paperwork you will provide the lender. In addition, if only one of two spouses was on the original loan, the other spouse’s income can count so long as it is documentable.Sample hardship letter

Once you calculate all documentable monthly income from all household sources you then have what you can present to the lender as the new qualifying income.

To calculate a qualifying monthly mortgage payment, use the benchmark fully amortizing 5.00% rate on whatever the new balance might be, counting arrearages if they are added back into the loan. WARNING: this is only for a general qualifying exercise only; do not expect this rate or payment! If the payment at 5.00% is just too high, then you may not be an appropriate candidate for a modification. However, you can still request help with other services such as a deed in lieu of foreclosure, a short sale or postponing as long as possible a notice of trustee’s sale in an effort to help you transition to more affordable housing.Sample hardship letter

Sample Hardship Letter: Reasons to Conduct a Forensic Loan Audit
Obtaining a Forensic Loan Document Audit is essential in every Loan Modification, Short Sale, and Deed in Lieu resolution. The findings of an audit can significantly improve your chances for a positive resolution. The following are common reasons to conduct a forensic loan audit:
1. General Loan Documentation Errors
2. Reverse Engineering
3. Real Estate Settlement Procedures Act (RESPA) Violations
4. Truth in Lending Act (TILA) Violations
5. Home Owner Equity Protection Act (HOEPA) Violations
6. Good Faith Estimate Compliance
7. Misleading Disclosures
8. Overstated Home Values
9. Overstated Income in the Loan Application
10. Lender and/or Broker Misrepresentations
11. Usury Violations
12. Excessive ARM Adjustments
13. Packing
14. Excessive Points & Fees
15. Predatory Lending
16. Forgery
17. Loan Flipping

Sample Hardship Letter: To perform the most comprehensive forensic loan audit you should compile all of the loan documents you maintain and get all of the loan documents your lender maintains. A Qualified Written Request (QWR) is a written demand to your servicing company. After receiving a QWR, the servicing company has twenty days to respond to the request and forward a copy of all loan documentation on file. The servicing companies also have to suspend all reporting activity to the major credit bureaus and then resolve the issue within sixty days. Federal RESPA laws require the servicing companies to comply and respond within this specified time frame. A QWR will be generated by you and submitted to the servicer for every file prior to the completion of the forensic loan document audit.

Sample Hardship Letter: The single most important question consumers ask themselves during the foreclosure process is whether it is better to lose their house to foreclosure or file for bankruptcy protection.

A foreclosure will remain on your credit report for 7 years, while a bankruptcy remains for 10 years. If you ever plan on getting any kind of loan, especially a mortgage, lenders are going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include a house.

Even in the heyday of the subprime loan era you could obtain a loan one day out of bankruptcy. But a foreclosure was ALWAYS a black cloud and lenders usually wanted three to four years time to pass before considering a borrower for a loan.

No one will argue that the days of banks lending to anyone with a pulse is over. What this translates to for the consumer is that you should expect to have to wait at least four years from the time of bankruptcy discharge to obtain a mortgage with relatively favorable loan terms.

The main goal in trying to perform a loan workout with your lender is to avoid the catastrophic credit implications of a foreclosure or bankruptcy. But sometimes, even the best efforts to save your home and your credit fail.

Hoping for the best but preparing for the worst is the mindset anyone in the foreclosure process should maintain. There are no guarantees that even the hardest efforts to work with your lender will meet with success. If you are to be prepared for the worst, then it is important to consider the process of bankruptcy.

There are different ways to file for bankruptcy and not all of your debts have to be included. So even if faced with bankruptcy, you’ll need advice from someone, either a good credit counselor or a bankruptcy attorney that can walk you through the choices you’ll face.

While the bankruptcy process in the U.S. is governed by federal laws and handled by a system of federal bankruptcy courts, state laws regarding consumer debts and the disposition of property also come into play. There are also different types of bankruptcy filings. No matter which course you take, the filing stays on your credit record for 10 years. This makes it very difficult to get any type of loan during the bankruptcy process and even afterwards. If you can obtain a loan it will surely be more expensive than if you did not file for bankruptcy.

Sample Hardship Letter: The two most common forms of personal bankruptcy are called Chapter 7 and Chapter 13. Under a Chapter 7 filling, you get to keep certain property (this is where state laws vary), but the rest is turned over to a court-appointed trustee that sells your eligible property or gives it to lenders to satisfy your debts. Under a Chapter 13 filing, you pay back your debts under a plan worked out by the court. The trustee collects payments, pays off your debts and makes sure you stick to the plan.

If you own a business, you may want to consider a Chapter 11 filing. This let’s you stay in business, as long as the court and the people you owe money to approve of the plan to pay off your debts. If the court decides a trustee needs to be appointed, the trustee takes control of your business and its assets.
Not all debts can be wiped clean in bankruptcy. The list includes alimony and child support, taxes, court fines and most student loans. New debts, taken on after the discharge, aren’t included. And if the judge finds out you’ve lied or committed fraud, your discharge can be denied.

Sample Hardship Letter: You can also choose which debts you want to have discharged while you keep paying off others. You might want to work out a payment plan so you can keep your car, for example. To do this, you have to sign a “reaffirmation agreement,” which says that you promise to pay off that debt. If you don’t pay it back, the creditor can send it to a collection agency like any other debt.

If you’ve filed a Chapter 7 bankruptcy and gotten a discharge, you’ve got to wait 8 years before you can do it again. There are different limits on filing for Chapter 13, depending on whether you’re trying to get debts discharged.

If you’re having trouble making payments or even if you are behind by a month or two, contact and attorney and/or your lender before you get further behind. If you can, do this before you are 30 days late or before you receive the official “notice of default,” indicating you’re several months behind. This will insure you have time to get prepared before the formal foreclosure process begins. Sample Hardship Letter

First of all, you need to get honest with yourself about your situation. You need to take a good hard look in the mirror and decide if you can really afford your home and if you really want to save it. Either way, you are going to have to make a plan and you are going to have to act on that plan.

You may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If your mortgage balance is greater than your house is worth, you have the option of negotiating a short sale with your lender. You’ll still owe money to the lender even after the house is sold. In some cases, lenders will let you off the hook for that amount rather than go through the expense of foreclosing. But you may not be completely off the hook: you may owe taxes on that amount. Consult an accountant for more information regarding the tax consequences of short sales.

Sample Hardship Letter: You can also try something called a “deed in lieu of foreclosure” which basically means you turn over your house to the lender and walk away without owing anything. However, you’ll need to work this out with the lender as well.

A good attorney who knows real estate and mortgage law can help you when you are facing foreclosure. If you cannot afford proper legal representation, then you should seek assistance from a legal aid or pro bono attorney. You can also seek a referral from your local BAR Association or get help from a legitimate credit counselor (from an accredited, non-profit agency).

A competent third party is a great choice for most people because they may be able to help smooth out the process and make sure that no laws have been broken by the lender when you received the loan.
If it is found that Truth in Lending Act, RESPA and other predatory lending law violations have occurred, then you may have legal recourse to sue your lender. A bankruptcy, then, would not be necessary and you can save your home and your credit form a foreclosure.

If you never seek proper legal advice, then you will never truly know what rights you have to properly defend yourself against your lender.

Deciding whether foreclosure or bankruptcy is worse for you can be difficult to define. What makes this such a difficult question to answer is that no two loans are the same, no two consumer hardships are identical and hence what is best for you will not be the same for others. Getting advice from competent and trustworthy sources and educating yourself about the process of foreclosure and the options at your disposal is the best way to begin to make a sound decision.

Sample Hardship Letter: Principle Reductions: Wipe Out Your 2nd Mortgage with Bankruptcy

Millions of American homeowners are now upside-down on their home mortgage and they are looking for a way out. In some areas like the Inland Empire of California, local homeowners have seen values drop 30-50% and many are making a “business” decision to walk away without ever exploring ways to save their home. If you have decided to walk away from your home and think you have no other option but to bail on your upside-down house, you may want to read this.

Wouldn’t it be much easier to save your home if you only had a first mortgage and no other payments? What if you could effectively wipe out $50,000, $100,000 or $200,000 of what you owe on your mortgage? Also, if the market turns around, think of all the equity you could build back up years from now?
For homeowners who have taken out a second mortgage on their home, facing financial difficulties can be particularly challenging. In most cases, a second mortgage reduces your home equity to a very small margin leaving you vulnerable to the whims of your lenders. In cases where real estate values have declined, as we are seeing in most markets today, there are strategies that you can use to protect yourself from excessive debt. Current bankruptcy law allows judges to approve the loan modifications of the terms of certain debts, namely auto and student loans and second-home mortgages. In the case of second mortgages, if the value of the property falls below the loan amount, debtors potentially could reduce the balance of the loan to equal the current value of the property. Sample Hardship Letter

Sample Hardship Letter: When a judge removes the second mortgage during bankruptcy proceedings it is referred to as “stripping” the lien, a “cram down” or “strip down.” This can happen if the loan is secured by other collateral that is part of the bankruptcy filing or if the home is not your principal residence or even if the payment structure on the second mortgage falls heavily during the bankruptcy filing period itself.
Here is a Lien Stripping Example:
• Home is worth $200,000.
• The first mortgage is $200,000.
• A second mortgage (or in certain states, a deed of trust) for $100,000.
• Lenders are only secured up to the value of the property. In this case the first lender is secured by the property value.
• The second lender has nothing securing their lien. They are unsecured because the property has no value left over from the first lien. In a Chapter 13 bankruptcy, you can lien strip the second lender.
• The second lien is treated as an unsecured creditor.
• Most likely the second lender will not be able to collect on the mortgage after the bankruptcy discharge and the homeowners (debtors) still get to keep the house.
• The homeowner would not even have to pay the lien when they sell the house.

Now, THIS IS A POWERFUL tool for homeowners who are underwater!

Sample Hardship Letter: Additional liens on your home beyond your initial mortgage, whether you have taken a second mortgage or just another related lien, could be negated in the case of a Chapter 13 personal bankruptcy filing.
Liens can be stripped off of the debtor’s assets in Chapter 11 or Chapter 13 when there is not enough equity in the asset, after deducting senior liens from the property’s current market value, to secure the unsecured in whole or in part, where the lien exceeds the value of the debtor’s property. Section 506 of the Bankruptcy Code acknowledges that a lien is only a secured claim to the extent there is value in the asset to which it attaches. To the extent that the claim exceeds the value of the collateral, that portion of the claim is unsecured. In Chapter 11 or Chapter 13, even voluntary liens, such as mortgages and security interests, can be stripped down to the value of the collateral, with the exception of voluntary liens secured only by the debtor’s residence. Moreover, Congress is currently considering changes to bankruptcy law allowing the modification of home mortgages.
Despite the general rule, two exceptions may apply so as to allow lien stripping of a mortgage on a personal residence: loans based on a home plus other collateral. Lien stripping is prevented only when the lien is secured “solely” by a personal residence. Court decisions have made it clear that when the debtor has given other collateral (in addition to the personal residence; e.g., office equipment) as security for the mortgage, lien stripping will be allowed. Thus, if you will be taking out a second mortgage or refinancing your home, you should consider offering additional collateral, such as furniture, as security for the loan. This can be done under the guise of seeking better terms from the lender, such as a lower interest rate.
Many (but not all) bankruptcy courts follow a rule that makes a second mortgage totally unsecured if the first mortgage balance equals or exceeds the value of the personal residence. This exception will not apply in the case of a refinancing of a mortgage, since in a refinancing the new mortgage pays off the first mortgage. The exception is predicated on there being two distinct mortgages (a first and a second mortgage). For this reason, if you have the option of financing your business through a second mortgage or refinancing your first mortgage, the second mortgage may be the better choice, especially where the amount of the first mortgage is close to the value of the home.
In addition, remember that the general rule applies only to a lien secured solely by a personal residence. Thus, lien stripping will be not allowed for a mortgage on a building used in a business.
While there is no assurance of what the courts will decide, depending on the terms of the original loans as well as the details of your filing, there are options for home owners with multiple liens on their home. This is because most additionally mortgages are unsecured, especially in the modern context of depressed home values. While inflated home appraisals may have allowed you to take out an additional mortgage, it’s possible that your original home loan is now upside-down. When the real estate market was much more active, lenders often side stepped the 20% down payment rule by allowing the borrower to get private mortgage insurance. As a further side step this rule of thumb, many borrowers took out a second mortgage to cover the 20% payment which led to the additional lien on the home. Given current market conditions, many buyers ended up with net negative financing, or negative equity, before they even made their first payment (and often did not have to provide any collateral).
Within Chapter 13 Bankruptcy law, section 11 USC 1322, can potentially allow you to forego your second mortgage, under certain circumstances. If your second lien on the whole is unsecured, then when the value of your home drops below the first mortgage deed of trust, the second becomes wholly under secured. This second loan can be negated through a Chapter 13 filing.

The lien stripping program is available for individuals desiring to reorganize their debt using Federal Laws under Title 11 of the United States Code. The mortgage removal program can only be used in the context of reorganization, often referred to as Chapter 13.
If you own a home with more than one mortgage, you may be able to completely remove or “avoid” the second and subsequent junior mortgages from your home and county records, thus leaving only the first original mortgage!
To qualify for this defense, the court will generally require objective evidence that the home is appraised for less than the value of the initial mortgage, which can be obtained through a county property appraisal or through a third party certified appraisal that is accepted by the court. In an environment where home prices in most markets have fallen at least 30%, many borrowers may qualify.

Attorney Pernell Agdeppa has much to say about this bankruptcy defense for homeowners: “Homeowners can file a Chapter 13 bankruptcy and can pay the various filing charges/fees (to strip a lien we must file a complaint against the second or junior lien holder(s)).In my opinion, the most critical aspect of this process is to carefully qualify each potential client to determine whether bankruptcy is their best alternative and make them aware of its lasting credit impacts.” “While removing junior debt from their properties will help them financially, clients must also be capable of staying within their financial plan to fulfill their obligations of their Chapter 13 filing.”

Tax liens can also be stripped off in reorganization proceedings (Chapters 11 and 13) to the extent that the lien does not attach to equity in property. Tax liens can’t be avoided in Chapter 7 on the grounds that they impair exemptions; if the tax is dischargeable in the Chapter 7 filing, the bankruptcy court can determine the amount of the lien that is secured at the time of the filing. Payment of that sum entitles the debtor to the release of the lien.

Ultimately, working with a qualified tax and real estate attorney or experienced real estate bankruptcy lawyer will help you present your case to the Federal Bankruptcy Court, so it’s important to get qualified legal advice in advance regarding any filings.

Sample Hardship Letter : Using the forensic mortgage loan document audit as basis for pressuring lenders, you will move lenders to take immediate action to stop an impending foreclosure and keep your home safe and place yourself in a better financial situation. This audit reveals various federal and state violations or errors in the original loan documents. Our internal auditing statistics show that four out of every five loans we have audited have significant violations.

In the beginning of the process you will need to send your lender a Qualified Written Request (QWR). The QWR is a formal demand that the lender must comply with under federal law to produce copies of your loan documents within a specified timeframe. Once you have collected all of the required documentation from your lender you can proceed to perform a forensic loan audit. Sample Hardship Letter

Once the audit has been completed and if violations are found a formal request for a loan modification is sent to the lender along with an abundance of highly organized financial information that makes the best case possible as to why you (a) deserve a loan modification and (b) can afford the new payments. This is a long process that requires patience and negotiation skill.