Need a loan mod and chapter 7

[Lovesgirl]

We are going to try to get a loan mod with harp. My husband makes on his W2 $1947 per month gross. Our payment for 1st mtg is $1326. He is the only one on the mortgage. He and I work for a corporation and pay bills out of the corporation and checks if we need money. At the end of the year, the tax guy allocates it all to joint return as income, adjusted gross income. Can we do the Harp by just showing the W2 and if so, we might be declined because of not enough income to pay monthly expenses and the new house payment. But if we show the adjusted income jointly it is about $73,000 (course mine could be taken out). We do have about $40,000 in credit cards that cost us $1600 a month and I can come up with more expenses that currently the corporation is paying. Just not sure which way they will go, W2 or tax return? If we send his credit cards to CCCS thereby reducing our monthly expenses, will that hurt our chances of a loan mod thru HARP/BOA? if we file chapter 7 now, will that hurt our chances of a loan mod thru HARP? we are current on our mortgage and never been late.

We hvae a second mtg with BB&T for about 37,000 at 8.75 percent. They can give us lower rate about 6% but have to keep it at 15 years so we'd only save $70 a month. if we do that loan mod, does it affect us being able to do the 1st mod with hARP?

We really need to get out of the credit card payments but know the loan mod could take months and don't want to give them time to come after us before we can file bk. Doing a DMP would reduce our payments and help a little but I don't want to do it if it will hurt us.

Please advise if you know anything about this situtation. WE are in NC.

[2Bshinyandnew]

Since I plan on filing for bankruptcy eventually, I stopped paying the minimums on my 70K of CC debt and DID not include those payments on my expenses for my HAMP application. My application was submitted through ACORN housing to my servicer and the ACORN rep said if I wasn't paying the CC I need not include them on my application. In fact she said it can look BETTER for your chances at a MOD because your mortgage should always get paid before your CC. They are going to pull a credit report anyway. What matters for HAMP is:
~principle residence
~monthly PITI is greater than 31% of your gross
~Loan is less than $730K (approx)
~must have a hardship

Your unsecured debt really does not factor into the equation unless YOU add it in and that gives them a reason to deny you.

Some of my CC have gone unpaid for almost a year, and I haven't heard anything. It takes awhile for your unsecured creditors to get a judgment. The very soonest they would file suit, and RARELY do they do this so soon is 6 months. Chase and Capitol 1 may file sooner for amounts that they can file in a small claims/lower court, usially less than $3000. It then takes a few more months to go through the legal process, so at a minimum your looking at 9-10 months AT LEAST from the last payment to a judgement, and that would be a super-fast turn around. It's more likely double that.

If your planning on filing BK your just throwing that money out the window. Apply for a mod, if your eligible, finish out the 3 month trial period so that the mod is permanent and then file for BK. This process I'm guesstimating should take 9 months.

I still have not gotten my mod yet. Although HAMP is supposed to help even if your not late, my request has been under "review" since May. As of August 1st I am 30 days late. Because my HAMP request is being reviewed there has been NO collection activity from my mortgage servicer. The gal I spoke with in loss mitigation today told me that now that I'm late I will probably see some progress on my mod, although it's NOT supposed to be that way.

check out this:

https://www.efanniemae.com/sf/mha/mhamod/#

If you are in trouble and can't pay your mortgage, your unsecured debt goes to the bottom of the heap, especially if you plan on filing BK. If you file BK first, the automatic stay makes it very difficult to work on a mod so your bettter of applying and completing a mod and then filing for bankruptcy.

ALSO, I would check on this but I think NC is a non-garnishing state except for child support, taxes and the like. If so, those unsecured creditors are SOL, even with a judgment, which will get discharged with your bankruptcy, they can't collect anything, unless you have a ton of $$$ in a bank account which they can easily find.

[2Bshinyandnew]

I just re-read that your total monthly household gross income is $73000. Is this correct? If so, HAMP might be little help to you. You must include income from all sources even if a spouse is not on the mortgage. They are going to ask for most recent paystubs as well as most recent tax returns, so unless you recently became unemployed yourself, your income must be included.

Even so, if your planning on filing for BK, it's useless to pay those monthly CC minimums unless you have recent balance transfers, cash advances or luxury purchases.

[hereforinfo]

You will have to show all sources of income, so if he's taking draws from the business and it's counted as income on your tax returns, then you have to disclose that. I don't think the mod on the 2nd mortgage will have any negative effect for you. Basically what they want to do is get your mortgage payment down to about 31% of your gross income by lowering the interest rate and possibly extending the loan to a 40 year. As far as I know, they aren't concerned about your other debts.

[IBroke]

Now, first of all, is the OP seeking a Refinancing (HARP) or a Modification (HAMP)?

Based on the provided info, it seems to be HARP...

[IBroke]

I just re-read that your total monthly household gross income is $73000. Is this correct? If so, HAMP might be little help to you. You must include income from all sources even if a spouse is not on the mortgage.

I have to correct you on that one. According to the HAMP-guidelines, the monthly payment is 31% of the gross income of the BORROWER, NOT of the household-income. That does make a difference..

[Lovesgirl]

More info- need clarification on order of things

From what I gather from a BOA employee HAMP is the refiance, HARP is the one where they based your new mortgage payment on 31% of the person's income on the mortgage (just the husband).

So let me clarify this:
We got new bank accounts for personal and business (new company) at a bank we've never dealt with - Wachovia.
We refinanced our car loan with a credit union where we only have a savings account and that is new or it will be with State Farm. Probably final tomorrow.
Our "old bank" BB&T says they will remod our 2nd mortgage with lower interest and save us about $70 a month. Haven't started this yet.
Wait for the 2nd mortgage remod to go thru which she says will take about a week.
Stop payiing credit cards right after that.
And stop using them, of course.
Work on saving money to pay the lawyer for the bk and living expenses.
But Keep making the full mortgage payments and the car payment.
Immediately start the loan mod HARP process. Should we do this after we quit paying the credit cards or immediately and just don't count the CC that we plan to quit paying?
Once the mod goes thru hopefully, file the chapter 7 bk and reaffirm the 1st BOA and 2nd mortgage BB&T and the car (either state farm or state employee credit union)

question: how do we ensure that boa/harp uses just husbands' W2s and not the adjusted gross income on the tax return? Cause we won't and aren't making that money this year and we use the company corp funds to pay a lot of the overhead.

question: can we go ahead and send his credit card to a dmp to get a lower payment temporarily to buy us a few months of peace and then when we need to, stop paying his and mine (also at a dmp) without affecting our ability to complete the loan mod?

Thank you so much!

[IBroke]

From what I gather from a BOA employee HAMP is the refiance, HARP is the one where they based your new mortgage payment on 31% of the person's income on the mortgage (just the husband).

HAMP= Home Affordable Modification Program (with the 31%)
HARP= Home Affordable Refinance Program

Your bank was wrong on that one. Trust me, I know because we are already in the trial-period under HAMP.

BOA shouldn't adjust your new mortgage-payment under HAMP based on your past tax-returns. They should use the income he's CURRENTLY receiving. That's the whole idea behind the program. You can't spend income you're not getting any more. That's your hardship and the reason why you're asking for HAMP.

How are you going to make sure they are doing it right? Well, simply take 31% of your husband's CURRENT gross income - that's what the payment under HAMP will be. The trial-payment might be slightly higher. In our case, it's about 10% more.

Forget about the credit-cards. Simply save the money and don't pay them any more. Any additional payment is a waste of money.

2Bshinyandnew's explaination about the credit-cards is accurate. If you don't pay them, it's a plus for you when being considered for HAMP. We have a bunch of CCs we haven't paid for years - so they weren't considered as monthly expense.

Concentrate on the loan-mod and nothing else. As soon as the trial-period has been completed and your modification is permanent, THEN you can file for BK.

So yes, start the HAMP as soon as possible and when asked for expenses, only list your car and 2nd mortgage and not the CCs since you stopped paying them and won't pay them in the future.

[hereforinfo]

Here is the required income and debt documentation for HAMP:

For all borrowers obligated on the loan:
• Completed Form Form 4506-T, Request for Transcript of Tax Return. (Available at the IRS Web site: http://www.irs.gov/.)
• The most recently signed and dated tax return, complete with all schedules. If the previous year’s return is not available, the previous year’s Form W-2 for salaried borrowers must be provided. In addition, in all cases where the previous year's tax return is not provided, the Servicer must obtain a tax transcript by processing IRS Form 4506-T.
• Completed page two of Form 1126, Borrower Financial Information, if the borrower is current or less than 31 days delinquent. (Available on our Guide Forms Web page: http://www.freddiemac.com/sell/forms/.)
• The two most recent pay stubs or salary vouchers, along with most recent complete signed federal tax returns and other acceptable income verification documents.
• For a self-employed borrower, complete signed and dated federal income tax return for the previous year; year-to-date profit and loss statement that at a minimum reflects the last full quarter’s information; and other reliable third-party documentation the borrower voluntarily provides.
• Documentation must not be more than 90 days old as of the date the Servicer first determines borrower eligibility.
• Verified monthly gross income and determination of continued eligibility is required for all borrowers prior to the Servicer’s signing and return of the Trial Period Plan.
• If only net income is available, multiply the net income by 1.25 to obtain an estimated gross income for qualification of the borrower for the trial payment period.



They will need a copy of your most recent tax return, as well as the latest 2 pay stubs. I'm sure the current income is most important, but they want to see the tax return just to see the overall picture.


This is also listed in the fact sheet:

• Calculate the total monthly debt payment-to-income ratio (include non-housing debt, payments on junior liens, or mortgage insurance premium payments). Borrowers with ratios equal to or greater than 55 percent must agree to enter a free HUD-approved credit-counseling program.


And this is interesting:

May capitalize accrued interest, amounts advanced and paid to third parties for past due real estate taxes and or insurance premiums (and payments of taxes and or insurance premiums that fall due during the Trial Period), and delinquency charges.
• Unpaid late fees waived.
• No negative amortization.
• Principal write-down not permitted.
• A modified loan cannot be assumed.
• The UPB may exceed Freddie Mac’s conforming loan limit as a result of the modification.
• Any prepayment fee associated with the original mortgage is null and void by the modification.


Huh. No principal write downs allowed, only forbearance which is really just a balloon payment. Interesting.

[IBroke]

Principal write-down not permitted.

Huh. No principal write downs allowed, only forbearance which is really just a balloon payment. Interesting.

That's news to me.

Page 8 says something else.

http://www.ustreas.gov/press/release...guidelines.pdf

I'll investigate on that.

[hereforinfo]

Your link is dated March 2009, whereas the fact sheet I'm reading from is the updated version of July 2009.

http://wwwhrn.freddiemac.com/service/factsheets/pdf/mha_modification.pdf

There are just too many reasons why banks can't do principal write downs. Their hands are basically tied. A modification can cause the first lien to be demoted to a junior lien (second lien holders have to agree to resubordinate, and that could be costly or impossible to accomplish). Original pooling and service agreements limit the number of modifications. And of course principal reductions compromise the mortgage backed securities, which opens up the lenders to litigation. Many lenders prefer the safer route of foreclosure.

Servicers are denying mods left and right, and they can get away with it based on something called NPV.

[IBroke]

This is from the current website:

http://www.makinghomeaffordable.gov/...-answered.html

"The Home Affordable Modification Program is focused on getting as many families as possible who are struggling with their mortgages into a mortgage that they can afford over the long-term. It does this by reducing borrowers’ interest rates and monthly payments down to a level they can afford. In addition, the plan permits lenders to get to a level of affordability in a variety of ways, including reducing interest rates, extending terms, or writing down principal."

and

"The Home Affordable Modification Program gets the borrower's interest rates and monthly payments down to a level they can afford in a way that is most cost effective for taxpayers. That will keep millions from being foreclosed on. Our plan permits lenders to get to a level of affordability in a variety of ways, including reducing interest rates, extending terms, or writing down principal. In addition, we have incorporated principal write downs into our incentive structure in a productive way - success payments to homeowners are available to help pay down principal more quickly."

Our lender already offered a substantial principal-reduction prior to the launch of the program. In 2007, a special act was put into effect to avoid taxes on those forgiven mortgages. I'm wondering why if these reductions don't occur?

http://thomsonreuters.com/content/pr...taxacct/387742

I'll contact the HELP-Hotline tomorrow and see what's up. Now that would be a story if they would provide wrong information.

[IBroke]

This is from the revised FAQ-secition (updated July 16, 2009):

18. I owe more than my house is worth. Will a modification under HAMP reduce what I owe?

"The primary objective of the Making Home Affordable Program is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Servicers may, but are not required to, offer principal reductions. It is more likely that your servicer will use interest rate reductions and term extensions in order to make your payment affordable."

http://makinghomeaffordable.gov/borrower-faqs.html

Or this form, from July 23. Check out page 15. There is a field for "Forgiveness", indicatet as "C" (conditional).

https://www.hmpadmin.com/portal/docs...quirements.pdf

Also from July 16: "Principal forgiveness may be applied at any time." (page 4):

http://banking.senate.gov/public/ind...6-497ddee97e92

Really strange..

[hereforinfo]

Of course the government is going to say principal reductions may be offered. "May" being the key word. Freddie Mac is not allowing it on the loans they back, which is outlined in the documentation I referenced. Other lenders/services/investors may allow it according to the government, but the PSA's, lien subordination, and mortgage backed securities would usually make it impossible.

The program encourages lenders to offer a trial period payment, and not calculate/submit documentation for final modification payments until after the second to last payment is made and the income/debt is verified. Even then, there is usually a statement such as: "the HAMP will not be implemented unless the servicer receives an acceptable title endorsement, or similar title insurance product, or subordination agreements from other existing lien holders, as necessary, to ensure that the modified mortgage loan retains its first lien position and is fully enforceable" in the final modification paperwork. They don't always have that confirmation when they offer the modification. The second lien holder can and often does refuse to give up their position. The mod is also subject to what is in the loan's PSAs. They can also pull the rug out from under you after they run an NPV calculation during the process. So it doesn't really matter what they've offered you, it's not final or enforceable until several things have happened.

[hereforinfo]

Our lender already offered a substantial principal-reduction prior to the launch of the program. In 2007, a special act was put into effect to avoid taxes on those forgiven mortgages. I'm wondering why if these reductions don't occur?

That law was originally intended to help people who lose their homes to foreclosure or short sale and receive forgiveness on the deficiency balance. I suppose it would apply to principal reductions as well.

I'm confused, because in some of your posts you claim they offered you a principal reduction, in others you say principal forbearance. Which is it?

And FYI: the tax avoidance on mortgage forgiveness only applies to the portion of the loan that was used to purchase or improve the property. So if you took cash out during a refi or HELOC, only the amount used for home improvements can be included. The rest of the forgiven amount could be subject to income tax.