Loan Modifications: Looking for answers

By
Real Estate Broker/Owner with Pink Palm Properties

Loan Modifications: Looking for answers

September 30th, 2010 by 

“Ask the Pink Realtor:” Hollywood Real Estate Q & A

Thursday, 30 September 2010 19:53 Rochelle Le Cavalier
 
Dear Pink Realtor,

I need to do a home loan modification, and it is very important to find out my home’s actual value. Can you tell where to go and find out?
Sincerely,
Looking for the answer

Dear Looking ,
First, I will answer the question you asked, “How do I know what my home is worth?” Then, I will answer the question I think you are really asking, which is “How do I know if I can do a loan modification?” Both are excellent questions.


“How do I know what my home is worth?”

When people ask about what a house is worth, there are many ways to answer. In reality, there is only one test of the actual value of anything: market value.
Market value is exactly the amount of money one person is willing – and able – and actually pays to another for that item. Market value is often used interchangeably with the term fair market value. At the moment the transaction takes place, the market value is established. Five minutes later, that is no longer the market value but was the market value five minutes prior. Therefore, actual market value is tough to pin down with any certainty.
There are many ways to “guess-timate” the value of property. Realtors can do a comparative market analysis or CMA to determine what a piece of real estate will likely sell for. Some appraisers believe the fair market value listed by the county property appraiser is a reliable indicator. However, it is not based on the market value as defined and widely used in the world of economics. In my opinion, the former (CMA) is far more likely to be close.

The bottom line is this: There is no way to know with a high degree of certainty the market value of any property, particularly in the foreclosure-riddled South Florida real estate market and nationwide depressed economy.

For those folks who like to refer to the “real” value of their home as what it was appraised or sold for in 2006…well, I think you know where I’m headed with this one. That was then and this is now.

“How do I know if I can do a loan modification?”

Struggling to make mortgage payments while weighing the options (i.e., allow the home to be foreclosed, try to negotiate with the lender, list the home for sale, etc.) is stressful and confusing for any homeowner.

First things first. You do not need to know the value of your home to do a loan modification. The primary criteria in determining qualification for a loan modification is the borrower’s ability to make the new modified payment now and in the future.

There are 1,600,000 results on Google for the search “loan modification,” and there is a lot of bad information out there. In addition, there are many companies offering to “help,” most of which would like to collect some fees first. I recommend speaking with your lender directly and researching the process using trustworthy sources, such as the U.S. Department of Housing and Urban Development at www.hud.gov.
If the source of your information is a company selling services, then proceed with caution. There are some honest folks out there helping homeowners through this difficult process, but I am simply suggesting that you do your own research and take responsibility for managing the process.

According to HUD, a loan modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated and results in a payment the mortgagor can afford.

This is determined by the lender reviewing income and a detailed financial statement including income and expenses provided and prepared by you, the borrower. The lender will review income and expenses to demonstrate that if granted the modification, you will be able to afford the new, lower payment. You must also demonstrate that you face a financial hardship as a result of lower income or higher expenses, for example.

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