New Home Loan Modification Program for Virginia Homeowners Announced by Department of Justice
Interested in a mortgage loan modification for your Virginia Prinicpal Residence? There is a new program for Loan Modifications for Virginia homeowners that may be of interest to you. On February 9, 2012, the Department of Justice announced that it and 49 State Attorneys’ offices entered into a settlement agreement with the five largest mortgage servicers – Bank of America, Chase, Citigroup, GMAC (now known as Ally Financial) and Wells Fargo. What does this settlement mean for you? If you have a mortgage with one of these banks, then you may now be qualified for a loan modification under this settlement – one that won’t just reduce your payments, but may even reduce your principal balance.
Part of the terms of this settlement is that these lenders will collectively be responsible for approximately $17 billion in consumer relief activities. Of this $17 billion, a minimum of $5 billion in credits must come from modifications to eligible first loans. In order to receive a credit, the servicer will need to enter into a loan modification with an eligible borrower that ends up reducing the principal mortgage rate as well as the total payment and interest.
How do you determine whether or not you are eligible? Your loan must be serviced by one of the five banks mentioned above, or one of their subsidiaries. Individuals whose mortgage is held by other banks will not be able to benefit from this program. Nor will those whose loans are owned by Freddy Mac and Fannie Mae, even if those five banks or their subsidiaries are servicing them. You must also at least 30 days delinquent, or otherwise be at imminent risk of default – and it is difficult to establish that you are in imminent risk of default without being behind. Generally, only a death in the family, a disability, or a divorce will do. Lastly, your loan balance pre-modification must be more than 100% of the value of your property – if your house has equity, you are ineligible.
What happens if you are eligible? The loan modification process will be under the standard HAMP loan modification or one of the proprietary or government modification programs, so the process will be very similar to any previous loan modification. The bank will still try and reduce your monthly payment to 31% of your income, although now a 10% minimum reduction is guaranteed, and the 31% figure can be waived if they reduce your payments by 20%. The big change is that, if your total mortgage is more than 120% of the value of your property, they must reduce it to no more than 120% – and can reduce it further if they want. In other words, a borrower with $300,000 owed on a $200,000 house can expect their mortgage to be reduced by at least $60,000 by the bank.
The banks will be attempting to identify and get in touch with eligible homeowners; however, this may not happen until November or later. If you believe that you are qualified, then it’s best to take the first step – get in touch with the banks, or seek out a qualified attorney to get you started as soon as possible.
Contact The Strong Law Firm today for a consultation about the benefits and procedure for a Virginia Loan Modification issues at (703) 350-4241.