Unraveling Money – My Exploration of Personal Finance and Productivity

August 3, 2009

Update on Union Bank Loan Modifications

Filed under: Mortgage — unravelingmoney @ 9:50 pm

I called today as I had promised, and surprise, all of the sudden they have loan modifications! They’re still not running the “Making Home Affordable” plan, but they have their own.

Essentially, they’ll just modify the loan to the current market rate. In my case, it was down a half a percent to 5.875, which is not ideal but would definitely be a reduction. As with everything, there is always a catch. In this case, the fee is $960. It’s not that bad, but it really just depends on the payoff time – how many months would it take to see a net benefit from the modification?

I would really prefer to refinance my entire loan (2 loans, really) for a lower rate and on a P+I basis. Then, in the ideal situation, I’d be able to have a lower payment and make more progress on paying down the principal on my loan. I’m exploring that option as well right now – more information to come in the next week if I’m lucky.

June 2, 2009

New York Times article on…my problem!

Filed under: Mortgage — unravelingmoney @ 10:13 pm

Very timely – the New York Times has a great article about homeowners who do not qualify for loan modifications even though the MakingHomeAffordable site states that they should:

For Some Homeowners, Promised Help Proves Elusive

The article profiles a homeowner in Arizona who, according to MakingHomeAffordable, qualifies for a loan modification – however, she has not been offered one by her mortgage bank, Countrywide (they’re still around??). Like me, she went down the checklist – mortgage greater than 33% of income, recent reduction or loss of income, owes more than home worth…but still apparently isn’t getting an offer from her bank.

It’s really frustrating – the only response from the government is that they need to “fine-tune” their reporting with these banks.

June 1, 2009

Digging into Mortgage Deferment with Union Bank

Filed under: Mortgage — unravelingmoney @ 10:33 pm

One of my new rules when dealing with financial issues is to make sure that I have asked all the questions necessary to get the full picture of anything I’m signing up for. I think that in the past I have been somewhat deficient in this area, and it needs to change. So with that in mind, I worked up a comprehensive list of questions for Union Bank regarding the potential deferment of my mortgage for some months.

Here’s the list:

1. Are there any negative repercussions to my FICO score or to the interest rate(s) of my loans at any point in the process?

2. Is there a lump sum payment due at any point after the deferral?

3. What is the maximum deferral period allowed? Any minimum?

4. Will taking part in this program affect my chances of being eligible for a loan modification or refinance later on in the life of the loan?

5. What are my chances of being approved? I haven’t missed any payments on my loan yet, nor do I want to.

6. Are there any other hidden costs or negatives that I’m missing?

With this list in hand, I called up Union Bank again and asked away – to their credit the agent on the phone was very nice although as with everyone in this industry right now – she didn’t have many answers.

The bottom line is this: I have no idea who mortgage deferment would be right for. The kicker for me was that if I was able to get my mortgage payments deferred, it would probably make me ineligible for a future loan modification, but *not* a refinance. Since I’d really just like to get my loan modified, that wouldn’t really make any sense for me.

That all being said, there is currently no loan modification at Union Bank of California, since they did not take TARP funds and are not required to offer the Making Home Affordable program. So I’m essentially going off something that the agent at Union Bank said – they might offer something similar later this summer. We’ll see.

Back to the Mortgage Deferment program – they said that it would not harm my credit/FICO score, and they said that there were no extra or hidden charges or rate increases associated with it. When i pressed the agent to explain to me who exactly would be eligible for this program, she guessed that perhaps someone with temporary high medical bills might be – but they would still have to show ability to pay in the near future.

Summary: Not for me – I’ll hold out for a loan modification or some kind of refinance – which will hopefully be coming sometime soon. It’s just a shame that no one can tell me when.

May 27, 2009

Modifying, refinancing or deferring mortgages

Filed under: Mortgage — unravelingmoney @ 5:34 am

I don’t have the greatest mortgage. I also don’t have the worst – my main interest rate is 6.375% and it is a 7-year-ARM, which adjusts only once a year after that. The intention, the pipe dream – is to refinance at a still-low-rate once I have paid off my second mortgage of $60,000. Problem is, $60,000 is a lot of money, a lot of money I unsurprisingly don’t have. As far as I know, I’m unable to refinance my home until I have 20% equity in the property. Right now I have 10% or so.

These are all things I wish I had considered more seriously before signing my life away.

It’s not all bad, of course – I make a good living (crossing fingers it stays that way) and I live in a very nice condo in San Francisco that I can basically afford, although I’m not actually gaining a lot of equity at present, and I have to watch my spending very, very carefully.

Strangely enough, my lender, Union Bank of California, did not accept any TARP funds from the Federal government. Because of this, they are not forced to participate in any loan modification programs such as http://makinghomeaffordable.gov/eligibility.html – but they intend to offer a similar program to homeowners in the next few months, according to the “Loss Mitigation Specialist” I spoke to today.

Side-note – interestingly, it turns out that loan modifications are much more beneficial for banks in the long-run over foreclosures. There was a great piece on This American Life recently – http://thisamericanlife.com/Radio_Episode.aspx?sched=1296.

Even though Union Bank isn’t currently doing loan modifications, they do have plans in place to help struggling homeowners. They will defer mortgage payments for a certain number of months, and then tack those mortgage payments on to the end of the life of the loan.

I am intrigued. There must be a catch. No such thing as money for nothing, right?

However, think of the benefits. By deferring my mortgage payments, I could use the money I would normally spend on my mortage to pay down my credit card debt significantly. This would allow me some breathing room to get my finances in order, set up my savings plan and my debt principal repayment plan as well (you can always pre-pay your mortgage principal separately if you like).

So, I am investigating this and asking the following questions of the bank:

1. Are there any negative repercussions to my FICO score or to the interest rate(s) of my loans at any point in the process?
2. Is there a lump sum payment due at any point after the deferral?
3. Are there any other hidden costs or negatives that I’m missing?
4. What is the maximum deferral period allowed? Any minimum?
5. Will taking part in this program affect my chances of being eligible for a loan modification or refinance later on in the life of the loan?
6. What are my chances of being approved? I haven’t missed any payments on my loan yet, nor do I want to.

I will update this blog with the answers once I receive them, more to come.

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