Loan Modifications Questions: escrow analysis, unemployed homeowners and upfront premiums.

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The Obama administration loan modification is out to help those that can help themselves not lost causes that is the claim anyway. The idea is not to bail out greedy homebuyers that took more than they could chew.

That is all very good in theory but how do you regulate that in practice? Not easily. Especially when those that “deserve” the loan modification could fall through the cracks if the requirements for loan modifications are not designed properly.

Understanding the rules can and does help people abuse the system and get breaks they don’t “deserve”. Of course if anybody deserves a loan modification sponsored by the tax payers is a point of dissent I’m not certain of.

However it might be the only way to know how to get the most of your loan modification is to understand the system. And the only way to learn anything is to ask questions. These are a few you might consider asking.

Are banks and mortgage providers required to perform an escrow analysis when completing a loan modification?

That would be an affirmative. Mortgage providers must perform a retroactive escrow analysis before completing a loan modification to ensure delinquent payments capitalized reflect the real escrow requirements required for those months capitalized. Put simply it is worth telling the truth from the word go. Or you are just wasting everybody’s time.

Some mortgages provide a premium refund when at mortgage payoff. Is the mortgagor eligible for the upfront premium refund at payoff of a modified loan?

This is a tricky one, it depends when the closing date occurred.
If your closing date occurred:
-   After July 1, 1991 but before January 1, 2001. The existing 7 year unearned premium refund schedule shown in Mortgagee letter 1994 remains in effect.
-   On or after January 1, 2001 that are refinanced, a 5 year refund schedule as shown in Mortagee Letter 2000-46 applies.
-   On or after December 8, 2004 refunds are eliminated except whne the mortgagor refinances to another FHA insured mortgage, but to a modified 3 year repayment period.

Lets imagine you lose your job. Not a very happy thought, but hey it happens. Can a mortgagee qualify an asset for the loan modification option when the mortgagor (that being you) is unemployed but your wife is employed although she is not on the mortgage?

It depends on the mortgage provider which admittedly is not very comforting. The mortgagee (that is the bank or lender) should conduct a financial review of the household income and determine if there is enough to pay for a modified loan payment but not enough to pay back what is owed.

If this is established the bank must consult it’s legal counsel to determine if the loan modification is possible as the spouse is not included in the original mortgage.