'My Payments Are Just Too High'

Published: Wednesday, May 27, 2009 2:00 PM PDT

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Guest-host Gary Laturno, a real estate attorney and broker, tackles your real estate questions today as part of Savvy & Sage: Tips on Buying and Selling in 2009.

Reader Rick asked:

Hi Gary, my house loan to value is now about 120%. I have a good job and want to save my house, but my payments are just too high. I understand the banks may drop my payments to 31% of my income, which would be a huge help and save me from foreclosure. Is this true and what do I do to hopefully save my house?

Go to www.MakingHomeAffordable.gov. Click the Modification link on the left bottom of the home page. Answer the five questions:

Is your home your primary residence?
Is the amount you owe on your first mortgage equal to or less than $729,750?
Are you having trouble paying your mortgage?
For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?
Did you get your current mortgage before January 1, 2009?
Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) more than 31% of your current gross income?
Note: if you are uncertain, click here to determine

Click Submit. If you answer "No" to any question, you are not eligible for a loan modification. If you answered "Yes" to all five questions, you will be given a list of documents to collect and submit to your lender. You may be eligible for a loan modification. Call your lender. Talk to the lender's loss mitigation or workout department.

Under the Obama plan, the lender will decide if they will offer you a home retention option (a loan modification), or a home liquidation option (short sale or deed-in-lieu of foreclosure).

How will the lender decide which option to give you? They will do a Net Present Value Test, which is a college level math calculation. (If you want the details of this test, go to www.FinancialStability.gov for a discussion of the test/calculation works.) The lender makes a business decision. In essence, they determine if they will make more money by modifying your loan and keeping you in the home or by selling your home today via a short sale or foreclosure.

Caution: Do not pay anyone to do a loan modification! Do not pay an upfront fee to anyone! Beware of the many scam artists who are taking advantage of distressed homeowners. Free help is available! Call 1888-995-HOPE or go to www.HUD.GOV/FORECLOSURE.

If you have more questions for Gary Laturno, please leave a comment below or send an e-mail to kelly.bennett@voiceofsandiego.org.

-- GARY LATURNO

1 Comments so far on this story...

Gary, This is the best and clearest explanation of the HOPE program and offers an explanation as to why this program is a disaster in getting loan modifications done. Thank you.

Posted by Andrew Fagan | reply to this comment
May 27, 2009 3:09 pm

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