It's most unfortunate the relatively new 50-Year Fixed Rate Mortgage Loan was not more well-known and readily available when so many of today's delinquent mortgages were made a few years ago. Since the monthly loan payments are lower with a 50-Year Mortgage Loan it would have resulted in less mortgage delinquencies overall and reduced numbers of home foreclosures. The advice we can give homeowners is to apply for a long-term fifty year fixed loan the next time you get a home mortgage loan.

If you are past due, seriously underwater or possibly going into foreclosure status then contacting your home loan lender and trying to get a home loan modification is in all likelihood an exercise in total futility. The two primary reasons for the very likely futility in modifying or possibly restructuring your 1st mortgage or 2nd mortgage loan is discussed in #3 and #4 below. The so called lender or bank you are talking to is in most all cases only your loan service provider. Your actual loan is normally funded by investors. Therefore, despite your hardship letters and multiple requests to "modify" your loan, the servicer is merely passing that information, if they even bother, to your loan investor.

If you are not behind on your payments, there is no real incentive for the loan servicer to do anything for you.  I've had to call on clients' behalf numerous times and to different banks.  The answer was the same.  If you are not "90 days late, there's nothing we can do."

Why?  They don't tell us the reasons, but here they are: 

1. If you are 90-days past due, you can't go somewhere else to refinance.  Therefore, at 90-days late, your credit score would have been blemished and you are stuck with that mortgage loan and with the loan servicer.  Don't they know that you are stuck anyway if you have a prepayment penalty and negative amortization?

2. If you are paying on the home-loan, even if you claim you are struggling, in the servicer's point of view you are still making payments and therefore, your loan modification request is probably little more than an attempt to get them to give better terms and a lower interest rate.

3. If you verify how significantly deficient you are every month, your loan modification will be denied.  You will have to show that you have more income to qualify.  But how much more?  These servicing reps are very elusive to answer this question and sometimes become defensive.  Your question would be why would you ask for a loan-modification if you were not struggling to make the payments?  This might be just a plot by the servicer to make the homeowner forego paying other bills just to pay the mortgage on time.  But I know the servicers and banks will claim otherwise.

4. "Damned if you do, damned if you don't" because the opposite issue can come up (in addition to possibly being too deficient as far as your debt to income ratio goes as discussed above) in that if you have the reverse situation where your debt to income ratio is considered reasonable or not bad you will also be denied. The banks and lenders use a somewhat secret formula (which they don't like revealing, especially to the borrower) which we believe to be roughly 30% as a ratio of debt to income. Too far below the formula and your loan modification or loan restructuring will be denied and too far above the ratio your loan help will also be turned-down!

5. If they in fact modify the loan for you, your interest rate might be lowered, but you will have to pay PITI (principal, interest, taxes and insurance) and impound.  This new loan payment might even be higher than your current minimum payment.

6. The loan servicing firm claims it can not modify both the first and second mortgage loans. So what are you supposed to do about the second loan? Well, I've tested one servicer by calling and saying, "I'm calling to advise you we are going to have to stop paying on the second mortgage loan."  They didn't know how to respond! I have put them in a difficult position.  The second loan, although held by the same servicer, is likely funded through a different group of investors because of a different set of criteria to qualify for the loan.  What else could they do but to try to negotiate with me to lower the payments if I make partial payments and act like a deadbeat for a few months?

I mean it has to get this far and the servicer continues to claim nothing can be done until I am 90-days late is reached but I've already bought another house somewhere else and could care less if I lose this one, which is underwater, what could the loan servicer do? They could try to collect. I mean I'm still paying on the first mortgage loan.  The first group of investors won't initiate foreclosure because I'm "current".