Getting approval to have your loan adjusted is a challenging process, and some lenders even give their borrowers a hard time. The most important thing here is to ensure that you do understand your rights as a borrower when it comes to loan modification so that you'll be able to respond and react properly towards a lender who's making life hard for you. In such cases, you will surely benefit from having a lawyer, and you should also know how to determine whether or not you are a victim of predatory lending.
1Know Your Rights
It's important to remind your lender of the consumer laws in your region, especially if he is particularly hesitant about cooperating with you when you do approach him regarding a loan modification. Even a reluctant lender will be forced to work with you if you are aware of your rights as a borrower. Certain regulations or laws protect the lender and the borrower, and it becomes a legal problem if the rights of one or the other are not being upheld.
Yes, purchasing a house is costly, which leads most people to borrow a significant sum of money so that they can buy their dream home. In case you want to negotiate with your lender or perhaps apply for loan modification, you can check if your lender or loan originator has certain violations regarding the TILA (Truth-in-Lending Act), HOEPA (Home Ownership and Equity Protection Act), or RESPA (Real Estate Settlement Procedures Act), which can be a helpful move on your part.
2Results Of Legal Actions
In case you do opt to take legal action because you discovered a violation, do not be quick to assume that you'll end up with a large settlement. If you are not a lawyer, always seek legal advice when it comes to such matters. It is a fact that a significant sum is at stake in such cases, and there are disclosure laws that help to ensure that a borrower completely understands what he is doing before he signs any document.
In case your lender refuses to honor the agreed disclosures, and you have supporting evidence to prove it, you can go to court, and your lender may be required to either rewrite your mortgage or pay you damages. A Legal action is a prudent option if you notice that your lender is unwilling to cooperate, non-responsive, or secretive or unclear about documentation or disclosures. In such cases, approach a reliable real estate attorney who can advise you about the next step that you should take.
3Missing A Disclosure - What Now?
When a lender misses a disclosure, this does not mean that the court will automatically rule in favor of the other party. In case a lender frequently employs this bad business practice, your state's legal office can file a suit against him. However, this won't have a bearing on your case.
You can claim that you did not fully understand the loan. Say that your lender failed to explain everything or disclose crucial issues thoroughly. If you want to have your loan modification application approved, you can approach your lender and argue that there were vital issues that he failed to disclose properly, when the original contract was signed.
4Know The Different Types Of Mortgages
Like other products out there, the mortgage is also an item that's being sold by a loan issuer. There are many different kinds of loans, such as mortgages with fixed or adjustable terms, amortization products, as well as reverse mortgages. The terms and conditions regarding these types of mortgages can vary depending on how the real estate market is doing.
Recently, the housing market was at a lull, and this resulted in the elimination of some products that involved more risks; yet, you must realize that everything is a cycle, and it's possible for these things to appear again soon. Each time a lender recommends a certain product to consumers, he is legally required to explain all components of the loan; and he must also see to it that his clients understood everything. Once you understand the pros and cons of each, you will be in a better position to make a more informed decision.
5Be Aware Of Monthly Payment Computations
Typically, the total monthly payment that you must make on your loan involves the cost of financing and the loan term. The interest rate is a certain percentage of the base amount. When the loan is being advertised, a lender must provide the APR (annual percentage rate) to consumers.
The APR can be adjustable or a fixed percentage. The term pertains to the length of time given to a borrower to pay back the total loan amount in full, as long as all payments are made on time. The new loan will also include all fees that were stated in the original loan.
6Junk Fees - What Are They?
Your new agreement may include junk fees, which are fees that lenders add to enjoy greater future profits. To illustrate, lenders could charge for services that other companies usually do for free. It is fine for lenders to add junk fees; however, such should be clarified and stated before making the new loan a formal contract. Such fees should be identified before closing, and this should include the HUD-1 settlement, which is also referred to as the Good Faith Estimate.
All in all, during the loan or refinancing process, it's prudent to compare lenders and choose the best one considering your present financial status. You can carefully study the interest rates being offered, as well as the typical lenders' fees. Perhaps you'll notice one lender who adds more junk fees than others. You will see these in good faith estimates (GFE) that you could get while shopping for lenders.
7Carefully Evaluate Good Faith Estimates
In case you cannot get hold of several GFEs when you want to compare and evaluate fees, you can get in touch with a real estate lawyer or a mortgage broker who can guide you. But getting several estimates is not the best move if you are out to obtain refinancing to get yourself out of a particularly difficult financial situation. Instead, ask the right questions.
The first question that you should ask is, "To get a quote that I requested, am I required to pay the application fee or any fee upfront?" Your second question should be, "In case I fail to close the loan, will I be able to get refunds - either complete or partial refunds?" Moreover, be aware that ARMs (adjustable-rate mortgages) have made life difficult for many borrowers before. A significant percentage of lenders aggressively defended the supposed benefits of ARMs without fully explaining the consequences to the oblivious borrowers.
8Be Careful Of Low Intro Rates
One main strategy that lenders use to convince people to get a loan easily is to offer a low introductory rate. Because interest rates of ARM loans can change, homeowners may suddenly find themselves paying more and more every month in just a short amount of time; ARMs can go up or down. During the most difficult moments of the mortgage collapse, the payments and rates for a lot of homeowners experienced a significant drop.
Even with the considerable decrease, the substantial teaser rate increase, from 3.75% to around 6% to 7%, was still too costly for homeowners. It is also not a good idea to assume that rates will remain at a low percentage. In case the rate is currently stable because of ARM, things could change quickly, which is why it's best to check out the benefits of a fixed-rate mortgage.
Before deciding on a loan, you must meticulously assess all your options first. In case you believe that you are a victim of predatory lending, get in touch with a trustworthy real estate attorney as soon as possible. It's unlikely that you'll get a big settlement from such a lawsuit, but it's possible that you'll get loan modification more quickly, especially if the court rules against your lender. Maybe your lender would cave in and give in to your requests without either of you taking matters to court. Remember, if you suspect that your lender is victimizing you, do something about it!
Jackie Wing is an Alaska native, who enjoys snowboarding more than is probably socially acceptable. She lives in Anchorage with her two dogs Reese and Peanut, or as she likes to call them "Thing 1" and "Thing 2."