1. What is the first step in requesting a mortgage modification?

If you are seeking a mortgage modification, your first step is to send your lender a hardship letter. Your hardship letter should explain why you are seeking a mortgage modification along with the reasons why you can no longer afford your current payments. Whether it is because of a job loss, disability or some other reason, your lender will want to know your situation when considering your mortgage modification. Include your paystubs, bank statements and any other financial documents that will help your case in the hardship letter.

2. What should my debt-to-income ratio be in order to qualify for a mortgage modification?

The ideal debt-to-income ratio to qualify for a mortgage modification will be different among lenders. Most of them, however, would require a ratio under 45 percent. According to the governmentÆs plan for mortgage modifications, lenders must bring your payments down to 38 percent or less. Contact your lender to find out what they require in order for you to qualify for a mortgage modification.

3. I recently became unemployed. Can I qualify for a mortgage modification?

Unfortunately, you cannot qualify for a mortgage modification if you do not have a source of income. If your spouse still has their job, however, you may be in a better position to qualify for a modification.

4. How long will it take for me to get approved for a mortgage modification?

Typically, it takes between 30 and 90 days in order for a borrower to get approved for a mortgage modification. However, the time range depends on how fast your lender works to help you and the number of cases they are dealing with. These days, it may take a little longer with so many homeowners applying for modifications.

5. Should I let my mortgage payments go into default before applying for a mortgage modification?

Although many people in the industry will tell you to stop making payments before applying for a modification, lenders will typically work with you even if your mortgage is in good standing. According to the Home Affordable Mortgage Program, lenders are allowed to modify your mortgage loan even if your account is up to date but you are in danger of defaulting.

These are just a few questions many people are asking about mortgage modifications. Are you in danger of losing your home? Try negotiating with your lender before foreclosure. Many lenders are willing to work with their borrowers more than they ever have been.

There was a time when a small down payment or even no down payment at all was good enough for lenders to approve a buyer for a mortgage loan. That was just a few years ago. Unfortunately, practices like that is what led to the housing crisis that we are experiencing today. Many lenders have learned their lesson and they now require home buyers to put down more money in order to get approved for a mortgage.

President Obama announced last week that the down payment requirement for a conventional mortgage loan should be at least 10 percent. These are the types of loans that Fannie Mae and Freddie Mac can guarantee. Private lenders are also requiring a larger down payment before they will consider a buyer for a mortgage as well. They want to reduce their risk with falling home prices and the large number of foreclosures going on right now.

In nine of the larger cities across the country last year, the median down payment was just above 20 percent. That was for conventional mortgages. That's the highest median down payment in more than 20 years when the industry first started tracking that information. The 22 percent also represents a number that has doubled in the last few years from when the median down payment was closer to 10 percent of the hom's sale price.

Banks are requiring larger down payments under the theory that home buyers will have more invested and they will be less likely to walk away from their home if they have more invested in it. The higher down payments also reduce the negative impact that the banks have taken on the dropping home prices. According to a 2009 study conducted by the Federal Reserve Bank of St. Louis, buyers who have made small down payments on their homes are more likely to let their mortgages go into default when they encounter ôunfavorable economic circumstances, such as a higher interest rate, job loss or some other financial difficulty.

The unfortunate thing about the higher down payment requirement is that many borrowers cannot save up $10,000 or $20,000 to put down on a home. For these buyers, there are some programs that can help, including the Federal Housing Administration, the VeteranÆs Administration and others. Even FHA-backed mortgage require a 3.5 percent down payment before being considered for a mortgage loan. Some people who do not qualify for these programs have simply given up every achieving their dream of buying a home, or at least putting it on hold for the foreseeable future. Others, however, are stashing away money a little bit at a time and sacrificing so they can save up just for the down payment.

Are you considering buying a home but the down payment requirement is holding you back? Are you one of the ones who has given up? Or are you looking at this as a challenge and doing all you can to achieve your dream of owning a home?

There are many strategies going on these days as people try to get out from under their current mortgages. Some borrowers have legitimate reasons for being underwater on their mortgage, such as a recent job loss or medical emergency. Others, however, simply bought more home than they could afford. Either way, there are ways to make best of the situation. But is skipping your mortgage payments one of those ways?

In Massachusetts alone, there are about 36,000 mortgage borrowers who have simply stopped making their mortgage payments for at least three months. About 12,000 of those borrowers have not made a mortgage payment for an entire year or even longer. These are people who are trying to fight foreclosure, negotiate with their lenders for a mortgage modification or simply living for free until they officially get evicted. Many of these non-paying borrowers are the result of job loss, wage reductions or high interest rates on their subprime loans that the borrower simply cannot afford. After awhile, these borrowers simply gave up trying to keep up with their payments and they are now taking advantage of the lengthy foreclosure process while staying in their home for free.

According to some in the industry, many of these borrowers have been able to stay in their Massachusetts home for a couple years while waiting for the eviction notice to arrive. But with the backlog of foreclosures that lenders have in their system, it takes much longer than normal for the lenders to get around to evicting people. Others simply slip through the cracks for a number of years until the lenders catch up and find them.

Some advocates are saying this is a good thing for neighborhoods and lenders, though. If the people were kicked out of their homes, it could be several months or even years before that home is sold to another buyer. As a result, these neighborhoods could have many abandoned homes which brings down the property value and makes the neighborhoods less safe. Others are saying that the foreclosure process must be expedited to help the housing market rebound as quickly as possible.

There are special situations that are making borrowers decide to stop making payments, too. Richard Zombeck of Salem stopped making payments several months ago when he tried to negotiate a mortgage modification with his lender. The lender would not provide written proof of the loan modification that he was granted so he stopped making payments. He was afraid that if he made payments under the modification without written proof, the bank may seize it and he would be out all the payments that he paid in good faith. His problem began a couple years ago when his mortgage rates shot up to 11 percent. This made his mortgage payments much higher than he ever could afford.

In general, most people who are having mortgage troubles are trying to do the right thing. They are not looking to slip through the cracks or live for free off the lender’s dime. But they have fallen on hard times and simply trying to do the best they can and make the best financial decisions possible for their individual situation.

In the United States, the FHA guarantees most of the reverse mortgages that are taken out by senior citizens. These reverse mortgages are a part of the Home Equity Conversion Mortgage program. Currently, the program is doing an audit of the reverse mortgages throughout the country and the results of the audit are going to show a detailed list of reverse mortgage owners who have defaulted on insurance and tax payments.

Overall, there are more than 670,500 reverse mortgages in the United States. Florida alone accounts for more than 10 percent of that number, according to the statistics released by the U.S. Department of Housing and Urban Development (HUD). Of the nationwide number, preliminary reports estimate that about 5 percent of the reverse mortgages (about 30,000) of them are very late or delinquent. About 8 percent of FloridaÆs reverse mortgages are delinquent. One of the reasons FloridaÆs numbers are so high, according to some analysts, is because the insurance costs in the state are so high. Senior citizens have a hard time paying their homeÆs insurance premiums which causes them to fall behind.

The lenders that provide reverse mortgages for senior citizens are allowed to pay insurance premiums and taxes for the homeowner with the money available from the mortgage funds. However, when that money runs out, the lender has to advance the money so the FHA is protected on the loan. And even though many in the lending industry say they have never heard of a homeowner with a reverse mortgage being foreclosed on, it is possible because it is certainly an option that the lender has available to them based on the agreement between the lender and the homeowner.

To help make the situation better, HUD has provided about $3 million to companies that counsel homeowners who find themselves in trouble with their reverse mortgages. In addition to that, those with a reverse mortgage who are at least $5,000 behind on their insurance and tax payments will have up to two years to pay the money they owe before and major legal action is taken. Most of the people in trouble with their reverse mortgage owe less than $5,000 so a rash of foreclosures on these unique homeowners is not something we should expect any time soon.

One of the major obstacles to getting a mortgage and owning a home is the down payment. It wasn’t too long ago when home buyers could get great deals on their mortgage by putting either no money down or very little money down. But as we all know, the mortgage market has changed because of the problems that have occurred in the last couple years. The lenders don’t want to see a repeat of 2008 and, as a result, they are requiring home buyers to put 20 percent down when buying a home. How many people can actually put that much money down on a home? If you find this obstacle standing in the way of owning your own home, there is help available.

Federal Housing Administration (FHA)
The FHA is one of the most common ways to get a mortgage without a huge down payment upfront. The reason it is easier to get a mortgage loan through the FHA is because the loans given by this government department are insured in case the homeowner defaults on the loan. For this reason, it is easier for potential home buyers to qualify for a mortgage and they often only have to make a 3.5 percent down payment or even less depending on the price of the home. However, buyers must have a credit score of at least 580 in order to qualify for the 3.5 percent down payment. Another benefit of getting your mortgage loan through the FHA is that a friend, family member or charitable organization can pay your down payment, unlike other mortgages where the money must come from you.

Housing Agencies
There are several housing agencies, both on the federal level and on the state level, that will help financially with your down payment on a home. In North Carolina, there is a state agency that offers $8,000 in financial assistance for home buyers. The money is an interest-free second mortgage that is deferred and isn’t due until 30 year after the date of the original mortgage loan (unless, of course, the buyer sells their home in that time or refinances). Before signing up for state-sponsored financial help when it comes to a mortgage, know the specific eligibility requirements and the specifics of the loan so you aren’t surprised with repayment requirements that you were not aware of.

Save, Save, Save
One of the best ways to get a down payment for a home is to save up for it. Get serious about purchasing your first home and make changes to your lifestyle so you can put up money each week towards a down payment. It may take a couple years even to save for a down payment, but it will be worth it and you will feel an extreme sense of pride and ownership in knowing that you paid for the down payment rather than relying on an agency or some other help. An IRA is a great way to save up for a down payment because you can take out up to $10,000 from the account (without a penalty) if the money is going to be used for a first-time homebuyer expense.

It seems like every week there is at least one new story about a homeowner who has signed up for a mortgage modification through one of the federal government programs and ended up worse off than they were before. Here is another one of those stories.

The Weddles of Harris, Minnesota recently fell into financial troubles and they were unable to make their mortgage payments. When Chase, their mortgage lender, offered to reduce their mortgage payments by 20 percent, the Weddles were excited. That was back in November 2009 and the cut was a result of a trial mortgage modification. Sounds like a great deal, right?

Almost a year later, the Weddles were informed that they were denied for a mortgage modification. As a result of the denial, the Weddles would have to pay their back mortgage payments for the 10 or so months that they were in the trial modification. The total of that bill was almost $25,000. They needed to pay that right away to bring their mortgage current. If they couldn’t do so, they were in danger of going through foreclosure.

The Weddles were completely shocked. After all, they had paid their reduced mortgage payments on time each month. It was the bank that offered the 20 percent cut under the trial modification and the Weddles were doing everything they were supposed to do under the terms of the modification. As a result, the Weddles were deeper in debt than ever before.

Chase states that homeowners are giving clear warnings and disclosures about the possibilities of getting denied for a permanent loan modification. The lender says that the homeowners are also told about the possibility of the lump sum that could be due if they are denied for the modification. Unfortunately, the Weddles’s story is one that continues to happen despite the warnings and disclosures.

In addition to demanding a lump sum payment if the modification is denied, the trial modifications also ruin the homeowner’s credit rating. This is because a modified mortgage is typically classified as a “mortgage in default” regardless of the fact that homeowners often make their modified payments on time every month. For each month that the mortgage is in the modified stage, it is marked as another defaulted month on the homeowner’s credit report. This makes the modification a Catch 22 because it would be extremely difficult for a person to move out of their current home and get approved for another mortgage with these dents and dings on their credit report.

Only about 12 percent of homeowners who are delinquent in their mortgage payments have received permanent modifications under the government’s HAMP. While this program has helped a few hundred thousand people avoid foreclosure, it has fallen drastically short of its original goal of helping between 3 and 4 million homeowners who need it. Is there a better solution?

You wouldn’t expect people who make millions of dollars to default on their mortgage loans. After all, if they can’t make their payments, what chance does the average homeowner have of staying afloat in this market. But even the millionaires are going through foreclosure and losing their homes in some cases.

Many of these million dollar foreclosures are in prominent areas, such as the ones that overlook the oceans. La Jolla, California, a town near San Diego, is one of those places with nice homes with a breathtaking view. But home buyers pay a lot for that view. Darren Thomas is one of those homeowners that loved the view when he first moved in to his La Jolla home for which he paid more than $1.3 million. Today, that same home is worth less than $800,000 and Thomas is not enjoying the view as much as he once did. He has owned his home for less than five years and he has seen its value drop by more than a half million dollars.

As a result of its drop in value, Thomas simply stopped making payments about two years ago. “It was a business decision,” he said in an interview. His payments were $10,000 per month and his home was worth only a fraction of his overall mortgage. He decided to do what is called a “strategic default,” which is a conscious and willful refusal to pay a mortgage payment and put more money into a home that is worth a lot less than his mortgage.

Darren’s story is not a unique one these days. According to statistics, about 1 in 7 home mortgage loans over $1 million are “seriously delinquent.” One in 7 may not seem like a big deal but when you consider that only 1 in 12 of mortgages below $1 million are seriously delinquent, it makes you think a little. And the sad fact is that banks are less likely to foreclose on homes that have mortgages over $1 million as quickly as they would on homes less than $1 million. Darren is a great example. He has lived in his home for the last two years without making a payment. Banks don’t want these homes because they are harder to sell and they require more upkeep. The maintenance costs are higher than with the homes that cost less than $1 million. In addition, an empty million dollar home hurts the market immediately surrounding the home and brings down the value of neighboring homes.

As Darren says: “The loss is not mine. The loss is the banks.” He and thousands of other millionaires are being ruthless when it comes to their mortgage and just treating it as an investment that didn’t work out. Do you think this is fair?