With the incr
ease of mortgage defaults in California including the many Ventura County home owners who have defaulted on their mortgage, there are multitudes who are searching for the most practical way to save their home. The distressed home owners in Ventura County are bombarded by the media ads that promise a better, safer mortgage payment on a place these home owners would like to continue calling “Home”.
I have heard from many Ventura County home owners who, in despair, have made poor choices in an attempt to improve their current mortgage status. Home owners need to understand that they have options and that there can be dire consequences if unnecessary or ineffective adjustments are made to their mortgage.
What Is Refinancing?
When you refinance your mortgage you are paying off your existing mortgage with a new mortgage. The new mortgage will have different, presumably better, terms. When refinancing, since you are practically applying for a new loan, you are required to pay all the title fees, escrow fees, lender fees, appraiser fees, taxes, and depneding on the loan terms, there may even be prepayment penalties.
Most home owners refinance in order to lower their interest rate, to extend the life of their loan, and/or to pay off other debt.
Home owners in California, including those in Ventura County, seeking to refinance their mortgage in the current market do face harder refinancing criteria. Lenders require that a home owners who are looking to refinance have a high credit score, a considerable equity in their home, and documented job security.
The Hope Act offers a solution for some home owners to refinance their existing mortgage into an FHA Insured Mortgage. However, most home owners who have defaulted on their mortgage will find it difficult to obtain ANY refinance of their current mortgage.
What Is Loan Modification?
A loan modification is a change of some or all of the terms of your current mortgage. Loan modification is an amendment between the home owner and their current lender.
Prior to early 2008 most lenders were not in favor of loan modifications. Loan modifications usually result in less interest for the lender. However, in our country’s current financial crises, lenders are desperate for some liquid assets to sell in the open market. Loan modifications untie the lenders’ bad assets (default mortgages) and enables the lender to sell the modified loans in the open market.
Despite popular belief, a home owner does not have to be in default to apply for a loan modification. However, a home owner needs to provide enough evidence to show that their current loan has placed the home owner in significant financial difficulty. The lender would rather keep the home owner as a client and modify the home owner’s loan than have to liquidate the property in a foreclosure sale. Remember lenders’ business is to collect money, not to sell homes!
In a market where home equity is scarce and many loan balances exceed home values, refinancing is almost imposible. Hence, loan modification can be the most attractive alternative for distressed home owners in Ventura County and throughout the country.
If you would like additional information regarding loan modifications or if you have any other real estate questions or concerns, please feel free to contact me, Mana Tulberg: (805) 443-8898.