Is a Mortgage Modification Your Personal Bailout?

Loan modifications have quickly become the best option for homeowners who need a break. Why refi when you can modify? Learn how to modify your mortgage and make it affordable.
By: Platinum Properties Investor Network
 
March 13, 2009 - PRLog -- Caught up in the quixotic quest to individually bail out every single American from the slightest vexation in their life, the U.S. House of Representatives will soon contemplate a bill that would allow bankruptcy judges to erase some mortgage debt for desperate homeowners and shield loan servicers who make mortgage modifications from potential bondholder lawsuits.

If we can put aside, for the moment, the fact that this is yet another in the string of recent historic government intrusions into the private sector, the obvious question becomes, “How can this help me?” Obviously, if you’ve been following Jason Hartman’s Complete Solution For Real Estate Investors™ for any length of time, we hope you have implemented prudent financial strategies with your property investing and don’t need a loan modification due to the danger of foreclosure.

And the mortgage modification certainly makes sense if you’re having trouble paying your home loan. To our way of thinking, it’s even better than refinancing, but you might want to consider taking one as a good business move for your income producing property portfolio as well.

First, let’s take a quick look at what the politicos are up to. The legislation calls for granting bankruptcy judges the power to erase some principal from troubled home loans in much the same manner as they can presently adjust other consumer debt. This was one of the provisions President Obama called for as part of his housing rescue plan.

The legislation would also make permanent the Federal Deposit Insurance Corporation’s (FDIC) insured deposit limit, which was recently raised from $100,000 to $250,000. Apparently, this is intended to revive the public’s trust in the banking system in one fell swoop. A point to ponder: If the whole house of cards can come crashing down at the one hundred grand level, is bumping it up periodically going to help? What number will it require to re-capture consumer confidence? What the fed hasn’t comprehended yet is that it’s not a matter of money. It’s a matter of trust and a criminally flawed behind-the-scenes power grab.

Continuing with the FDIC - the new bill would raise the agency’s credit limit with the U.S. Treasury from $30 billion to $100 billion, allegedly providing more ammunition to combat what it thinks could be a growing wave of bank failures from the skyrocketing rate of foreclosures. Does that number make you nervous? It should. It’s pretty big and American taxpayer pockets are only so deep.

One provision in the new legislation should be of particular interest to us as income property investors. It is the one intended to prod mortgage companies into loosening home loan terms on a scale they’ve not done before. In technical terms, it’s called a mortgage modification. Rep. Brad Miller, a Democrat from North Carolina laid the cards face up on the table when he said, “We have provided carrot after carrot to encourage them to modify loans. With the possibility of facing losses in bankruptcy, the mortgage servicers should have a justification for easing some terms.”

The problem heretofore with that line of reasoning is that many home loans are bundled as debt securities and sold to investors. If the mortgage company were to unilaterally modify the loans to help distressed borrowers stay in their homes, it would leave them open to lawsuits from bondholders.

Neatly sidestepping that bothersome legality, the new legislation provides a “safe harbor” clause to offer liability protection to mortgage services against irate bondholders. In other words, the fed is saying, “Go ahead and break the law. We’ll back you up.”
That’s a nice wingman to have and here’s how it can help you.

The tsunami of foreclosures has made the mortgage companies understandably nervous. They would love to be able to keep their clients from going into foreclosure. Toward that end, a loan modification makes perfect sense and it would be a good business decision to contact your loan holder(s) to see if they will agree to modify yours. They just might do it, even if your credit is great and you’ve never been late on a single payment.
Perhaps they will offer to lower the interest rate for a couple of years and then bump it up slowly back to the present rate. This is called a step modification. There are others. The basic idea is making a pre-emptive strike to stop people from defaulting on loans. Some money is better than no money and banks do not like the messiness and legal nastiness of dealing with foreclosures.

Maybe your lender has contacted you already. If so, don’t be shy. A mortgage modification is a good thing. For more detailed information about how to quickly take advantage of this proposed legislation, if and when it passes, visit www.JasonHartman.com/radioshows and listen to show #86 – You Deserve A Bailout Too! More On Loan Modification.

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Platinum Properties Investor Network is a comprehensive solution providing real estate investors with education, research, resources and technology to deal with all areas of their income property investment needs. Our conservative approach puts investors on the path to true financial security and personal wealth much faster than the unrealistic over-hyped methods seen on late-night TV. Not only do we offer you valuable assistance in acquiring properties, but we will show you how to develop an investment strategy that will take advantage of the next market downturn. You will also learn how to obtain cash flow, appreciation and lucrative tax incentives. To find out more, visit us on our website at www.JasonHartman.com.
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Source:Platinum Properties Investor Network
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Tags:Loan, Modification, Mortgage, Bailout, Governement, Real Estate, Finance, Economy, Money, Bankruptcy
Industry:Government, Real Estate, Loans
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