We were skeptical initially. These negotiators promised specific terms upfront – for example interest rate stays at 2% for the first year and gradually goes up to 5% fixed at the 4th year. It will stays at 5% fixed until the end of loan. The negotiators do not charge money until the loan modification is completed with loan paper signed. However the fee is quite steep in the range of $3000 to $5000. The process time is also shortened to 2-3 months – very good compared to dealing with AHMSI directly.

A couple of our clients received successful results through these 3rd party negotiators. However the program may not be suitable for everyone. For example if your interest rate is adjustable and quite low right now, and you plan to sell the property in and before 2014 when interest rate will start rising, there is no point to take the steep fee. Or if you can refinance, current 30 year mortgage interest rate is at around 4%. Also for those who will only save small amount each month, it may take years to recoup the upfront fees paid. Do the math before engaging with the negotiators.

Our Loan Modification Self Help Kit provides more detail of how to start engaging with these 3rd party negotiators. It also provides information to escalate your existing stalled loan modification application to AHMSI executives who have been instrumental in trying to help some homeowners, as well as investors keep their houses.

We surveyed all the respondents who responded either by emails or phone calls. The ratio of prospective tenants who are interested in lease to own program versus rental are eight to one. The outcome is no surprise to those readers who are experienced landlords. It is an American dream to be a homeowner, regardless what economic climate is.

Our simple experiment also shows that putting the right keywords in the “For Rent” classified section easily attracts 10x times traffic of just a regular for rent ad. In addition to higher interest, those inquirers are of higher quality. Someone who can barely afford rent would not bother. Someone who is not interested in longer term commitment would not bother. We got inquiries from those who are dedicated and responsible and dream to own a home. They care about making payments on time and work hard to either repair or maintain their credit. Those are the tenants much preferable by every landlord.

How to capitalize this high quality traffic is a topic that is worthy much discussion. Many clients frequently ask us if the lease to own program suits their individual situation. Keep in mind that as a real estate investor, you should plan to sell your property at certain point. This is why we have structured our Long Term Lease to Own specifically for real estate investors who take a long term view on their investments. It means to expect to sell your property in three to five years at least. During this time, you as a landlord receive higher rental income, and are able to sell the house in a few years when the property value recovers.

These consultants provide pretty good terms. We’ve seen 2% fixed rate for the first five years and 0.5% annual increase afterward up to 5%. They also claim that the mortgage mod can be completed in 2 weeks. They also usually have a local office and ask mortgagees to bring all the related documents to the office for the first and only in-person appointments.

These consultants know your full name, account number, phone number, address and probably more. Whether it is legal for the investors to disclose borrowers’ confidential information to non-loan-servicer is one question, having your information certainly makes their story of direct investor authorization more believable.Now the fee – most people are aware that it’s illegal in most states to charge upfront fees for mortgage loan modification work. These consultants did make it clear that their fees, range between $3500 to $6000, are not collected until the loan mod is completed and paperwork are signed with the investors. It’s steep fees, nevertheless to say. It may worth the fees if you are actually able to lock in the above loan terms, especially if your current rates are high. The higher your current interest and loan amount, the more saving you would have each month by going for the new rate. You should compare the fees with the savings for how long you plan to keep the loans.

We are in the process of working with a couple of clients to lock down the above rates by using the consultants. We approach them very carefully and make sure no fees are paid in any way until the loan documents are verified and finalized. We will report back the outcome when it is completed. Let us know or leave your comment below about your experience of using these consultants.

However, it is not common that Wells Fargo will reduce the principal if your mortgage is upside down. They will usually enter you into a three to five month trial period where they reduce your monthly payment based on your monthly income and expense. During the trial period, it is imperative that you make the reduced payment on time on the first day of each month. Your payment is not considered received even if it is made within the grace period.

After you complete the trial period, Wells Fargo will evaluate your case. There is no guarantee that they will grant you a loan modification even if you have followed the payment arrangement during the trial period. If your loan modification is rejected, you can contact executive office to escalate your case. But be prepared to submit your financial statements again.

If your modification application is approved, you will receive a loan modification approval letter and documents for the new terms. It is likely the bank extends your mortgage to a longer term like 40 years. It is not necessary that they reduce the interest rate, as long as they think the reduced payment is good enough to help you.

Once you have signed and returned the loan modification documents, do not believe you are done. It is still possible that the documents will not be processed by the bank to finish the final settlement. That means the bank’s system does not reflect your new mortgage terms.

You will still need to call the bank not just once but a few times to make sure they “settle” your loan modification and all the terms you’ve agreed have reflected in their lending system. It is simply too common for the bank’s mortgage department to be disconnected from its loss mitigation who made the decision on modifying your loan.

Now the public is angry with banks who have received billions of dollars of bailout money from tax payers. Banks are also facing investigations from state attorneys general on the potential fraud. What do all these bring to the borrowers?

This is definitely a good news for borrowers who wish to get their mortgage modified. As banks slow down in order to correct their foreclosure practice, banks are now under more pressure to respond to loan modification requests.

On the other hand, foreclosure is likely to take longer to complete, giving borrowers more time to negotiate terms with their lenders.

If you haven’t started loan modification for your property, now is the right time! Our Loan Modification Self Help Kit will be a tremendous help.

However, in order to take advantage of their better system, your mortgage modification applications still need to be in the right hands. If you find the phone representative does not offer much help in advancing your application, prepare to escalate the issues to receive right attention. An indication of the process going nowhere is when your files have been transferred here and there without no one having a grip on what is going on.

Central mortgage requires the borrower to fill out the bank’s own financial worksheet. They do not consider self-made forms even if you have included all the necessary financial information such as asset, liability, and monthly expenses for them to evaluate your case.

The company usually requires forbearance period before making the final decision on the modification. Toward the end of trial period, if the borrower has followed the forbearance arrangement, the bank should automatically send the loan modification approval documents to the borrower. All the borrower needs to do at that point is to sign, get the documents notarized, and mail them back.

The process is very smooth once the application is in the forbearance stage. Unlike many other banks, from where the borrower may continue to receive late notices in mail or phone calls during the trial period, Central Mortgage’s system is up to date so that the inconsistent communications do not confuse the borrower.

If you are behind the payments and already received the notice of default, the loan does not usually get bought by other lenders. No servicer would want to purchase loans that are not current. By the same token, loans in the process of modification are also unlikely to be bought because the borrowers are mostly having financial hardship. These borrowers may already be delinquent, or are becoming delinquent very soon.

In the event that the loan is being purchased and servicing is transferred to other lender, don’t believe your loan modification application will be transferred seamlessly. You should immediately call the new bank to verify all the documents have been transferred.

Since your new bank may have different requirements or process for mortgage modification, you will need to provide updated or even additional paperwork. More often than not, you almost have to start loan mod all over again.

The reason that the loan enters to such state is usually the mortgage notes’ investor wants to prevent the borrowers from re-applying for loan modification over and over again in a short period of time when their mortgage modification is rejected. Lenders require borrowers to wait for a reasonable time, enough to allow borrowers’ financial situation to be different to reapply for loan mod again.

Quite often, however, we see mortgage loan modification applications are denied due to reasons such as borrowers incorrectly filled out the financial statement, or bank’s processor failed to enter the data accordingly. As a result, the application is stuck in locked state.

Since the loan modification process can take a few months to complete, you will want to prevent this from the get-go. Make sure your loan modification application is filled correctly and readable, especially the financial worksheets. Also make sure bank’s processor does not screw up data entry. It is very important to be on top throughout the entire process.

The lender’s loss mitigation phone representatives usually do not have the privilege to even request unlock of the loan, even it’s caused by the lender’s own mistake. You will usually need to escalate the issue to the lender’s Executive or President’s Office to resolve such issue. Explain why your application should be unlocked. Once your case is re-opened, the loan mod process resumed. Note that this does not mean your loan modification is approved. It just means that your case is reinstated. It takes one to two weeks for the unlock request to get responded, if not longer.

Our Do-It-Yourself Kit: Rental Property Loan Mortgage Modification includes not only all the prevention techniques but also the valuable executive office contact information should your loan modification is ever stuck in locked state.

There are several things that you, as the landlord, can do to give your tenants incentive and motivate them to continue with the long term lease to own agreement. Just giving the tenant the option to purchase the property at the end of the lease term is the biggest motivator of them all.

Offering a monthly rebate to the tenant that goes towards their down payment is another good motivator. The longer the tenants are into their lease agreement, the more their rebate has accumulated. This means the tenant is less likely to walk away from the agreement or to not maintain the house.

Another good way to keep your tenants motivated is to provide them with an owner financing opportunity. The tenant’s payment history during the entire lease term, which is usually 3 to 5 years, becomes the main *credit* or foundation for your trust. This means the tenant will have incentive to make timely monthly rent payments and maintain the property; so you will feel comfortable carrying a note or mortgage for them during the sale.

You can report your tenant’s payment history to all three credit bureaus monthly. This will help your tenant to build their credit history. It is also incentive to keep them motivated to pay on-time. We covered this option in this blog “Help Your Rent-To-Own Tenants Build Credit”.

Wraparound mortgage also known as an all inclusive trust deed (AITD), commonly called a “wrap”. In a wrap-around mortgage transaction, the seller accepts a promissory note (or a contract for deed or land contract) from the buyer for the total amount of the purchase price less any down payment paid by the buyer. The new purchaser then makes monthly mortgage payments to the holder of the note, typically the seller, who in turn is responsible for making payments to the primary mortgage(s) on the property.

Usually this is a short term note with a 3-5 year balloon payment due. The promise behind this type of transaction is to allow the buyer time to obtain standard mortgage financing. Once the buyer is able to refinance the property all existing mortgages are paid in full.

One of the benefits, in addition to faster sale, quicker close, is that the seller often charges a higher interest rate than their existing mortgage to the buyers. This additional interest is called a spread and is interest income for the note holder. The interest income can usually range from 20% to 40% more than rental income. It greatly improves your bottom line compares to simply renting the property to a renter. Your cash flow can easily improve by more than 50% because the buyer typically will also pay for your property tax and insurance premium.

Due-On-Sale Clause

A due-on-sale clause requires that the entire mortgage balance is due if the home is sold. If mortgage payments are paid timely, lenders are not known to enforce this clause regularly, but buyers and sellers contemplating this type of transaction must be aware of all the risks.

The best ways to alleviate such risk is to require the use of Escrow Company that collects payments from the buyer and disburse payments to the seller’s loan lender before any remaining balance been forwarded to the seller. This makes sure the first loan is paid on-time. It’s also very important to keep the seller as the insurance’s beneficiary instead of the buyer. Changing beneficiary on the insurance policy is one of the major reasons the lenders find out the wraparound mortgage. In the current real estate market though, as long as it’s a performing mortgage, the chance for a lender to call due on a loan is slim.