Loan Modifications: Fact or Fiction “Making Homes Affordable”

So you contacted your lender and are trying to get a loan modification processed. They requested mountains of paperwork, and on a couple of occasions asked you to refax the paperwork because something is missing.  Sound familiar? It has happened more-often-than-not and is the most frustrating situation known to mankind. No one likes getting the run around, especially when it comes to the most important buying decision they made for themselves and their family. What do you do? Are banks really conducting loan modifications that are real … not some $200 to $300 trial adjustment that reverts back to the original payment in 90 days? Are the Government programs really helping people and do I qualify?

Here are two important questions to consider:

Should I pay to have a loan  modification company, attorney or any other type of service that claims they can modify my loan for a fee?

Great question, in most instances I will tell you no. Why? No one can tell your story better than you, it is your money, your home and your family and there is no magic spell that any third-party company can cast to reduce your monthly mortgage note. In the rare instances where a third-party company will be of benefit is when your work schedule doesn’t allow to communicate effectively with your lender. The truth is most of the major banks have systems and schedules in place that are flexible with your schedule.

Can I realistically get a loan modification?

Again, great question! It depends on several factors, but to really simplify the process, let’s take a look at the “Making Homes Affordable” government program.

Eligibility and Verification

You may be eligible to apply if you meet all of the following:

• You occupy the house as your primary residence.
• You obtained your mortgage on or before January 1, 2009.
• You have a mortgage payment that is more than 31 percent of your monthly gross (pre-tax) income.
• You owe up to $729,750 on your home.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

*Eligibility criteria is for guidance only. Also, this information has been pulled directly from the Making Homes Affordable  website.

If you meet these requirements you could be in luck. Now let’s do some quick math prior to you picking up the phone. The following formula will give you a really good idea of what you can expect. This is where we will produce a best case result and where I will remind you to be realistic.

The “Making Homes Affordable” program has a floor rate of 2%. The term of the loan can technically be extended to 40 years, but this requires multiple levels of approvals. Let’s say they extend your loan out 30 years at the 2% floor rate. This is where you must take your current balance and add on everything you are delinquent. This is your new loan balance. Obviously, the number will be higher than the current balance and it will be calculated at 2% for 360 months (3 years).

Here’s what it looks like:

Current Balance + Total Delinquency = New Balance
New Balance x 2% divided by 360 months = New Monthly Payment

So there it is, your new monthly payment under the “Making Home Affordable” program.

If the payment is not affordable for you, then don’t waste your time. Just so you know, any reputable real estate agent, loan modification attorney or any third-party entity will conduct this exercise and inform you of your eligibility based on your current financial situation. If they don’t, you should run away as fast as you can.

Be smart, be empowered and most of all be knowledgeable.

It’s Your Business … Business Planning

Most agents spend more time planning their family vacation than they do planning for the success of their business. It’s true, less than 5% of ALL agents currently have a formalized business plan. This series of articles will examine the components of creating a successful real estate business plan. Each month you and I will explore one of the following topics:

• Business Planning
• Exit Strategy
• Lead Generation
• Systems
• Training
• Coaching & Accountability
• Websites for Agents
• Database Marketing
• Farming Strategies
• Open House Strategies
• Listing Inventory

Business Planning

Pareto’s Principle, known as the 80/20 rule, states that 20% of the people produce 80% of the results or, 80% of your results will result from 20% of your activity. In any case, the rule holds true… except in real estate. Statistically, in real estate, the end results are more drastic. 95% of the results are produced by only 5% of the real estate agents. The rhetorical question is… “How do you get into and remain in the 5%.

The first step is to determine your income “Commitment” for your next year in real estate. There is no figure that is out of the question. It is entirely up to you and your motivation.

Let’s look at some numbers:

This plan is based on an 11-month year and a 4-day workweek. Let’s face it, we got into this business to set our own schedules and have “free time” for ourselves, right?

Your Commitment Income is $95,000

Your Average Home Sale Price is $289,000

Your Average Commission Rate is 3%

Notice that I have labeled your income “Commitment Income” instead of “Goal”. Goal is the most overused word in business today! How many times have you heard “Set your goal high and see how close you get to it!” or, “How close did you get to your goal?” We hear it all the time. However, a “Commitment” is entirely different. You must hit or accomplish a commitment!

The difference between a goal and a commitment is the result!

Here is a breakdown to indicate how many Appointments, Contracts, and Closings you will need to achieve your commitment. For this exercise I have used various industry benchmarks. The results and those benchmarks will vary with your knowledge, practice and experience.

Transactions Total: 14

Listings Closed: 8

Buyers Closed: 6

Listings

Listings Closed: 8

Conversion %: 88%

Listings Taken: 9

Listing Appointments @ %: 90%

Listing Appointments needed: 10

Leads converted to Appts. %: 20%

Listing Leads needed: 50

Buyers

Buyers Closed: 6

Conversion %: 95%

Buyers Offers Accepted: 6

Buyers shown who wrote %: 70%

Buyers Appts. Needed: 9

Lead Conversion %: 20%

Qualified leads needed: 45

Based on these numbers you will need to adhere to the following breakdown in order to achieve your commitment of 14 transactions.

Leads

95 Leads Per Year

8.6 Leads Per Month

1.97 Leads Per Week

.49 Leads Per Day

Appointments

19 Appointments Per Year

1.7 Appointments Per Month

0.39 Appointments Per Week

.098 Appointments Per Day

These estimates are conservative assuming only mediocre presentation and sales skills. I suggest you track your numbers and break them down into monthly, weekly and daily numbers as shown above. Can you follow-up on 2 leads per week and 2 appointments per month? Sure you can! This plan makes it possible for you to close 14 transactions per year and achieve your commitment with ease!

The following is also important to review consistently so as to measure your results and manage your activities closely.

Expenses

Advertising 9%

Supplies 6%

Auto 3%

Postage 2%

Professional Fees 1%

Miscellaneous 1%

Now that you have established the foundation of your business plan you are ready for the next step, developing an “Exit Strategy”. No one wants to work forever, so in next month’s article you and I will develop the exit strategy for your business plan.

Remember, it’s your business …

HUD Offers REO Homes for $100 Down in Select States, but not in California

HUD has approved a program aimed at putting foreclosed homes back into the hands of owner-occupant buyers.

In select states, from now into October of next year, buyers need a down payment of only $100 to purchase a HUD-owned REO home.

The buyer must be an owner-occupant, utilizing financing insured by the Federal Housing Administration (FHA). Standard FHA underwriting guidelines apply, and the sale must be for the full amount of the current list price.

The $100 down payment incentive program has been approved for two of HUD’s four national regions – the regions managed by the Denver Homeownership Center and the Atlanta Homeownership Center. HUD homes in the states listed, as well as the Caribbean are currently eligible for the program.

Denver Homeownership Center’s Jurisdiction:

• Arkansas
• Colorado
• Iowa
• Kansas
• Louisiana
• Missouri
• Minnesota
• Montana
• Nebraska
• New Mexico
• North Dakota
• Oklahoma
• South Dakota
• Texas
• Wisconsin
• Wyoming
• Utah

Atlanta Homeownership Center’s Jurisdiction:

• Alabama
• Florida
• Georgia
• Kentucky
• Illinois
• Indiana
• Mississippi
• North Carolina
• South Carolina
• Tennessee

CaribbeanHUD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on the home. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan.

Matt Martin, CEO of Matt Martin Real Estate Management (MMREM), says this is one of the most exciting features of the new incentive program and should drive a lot of exposure to FHA’s 203k offering.

MMREM is under contract with HUD to assist with disposition sales of its repossessed homes. MMREM handles properties throughout 16 states, or about a third of HUD’sREO portfolio.

With an FHA 203k loan, “buyers can find a property that needs some TLC, fix it up however they want to, and finance the whole thing for $100,” Martin explained.

“MMREM is excited to work with this recent initiative, in a way that it supports putting HUD homes back into the hands of homeowners,” Martin said.

In addition to $100 down instead of FHA’s typical 3.5 percent down payment, HUD says it will also cover up to 3 percent of the closing costs in most cases.