Posted on 03/26/2009 6:51:35 PM PDT by Mama25
A friend of mine has received information from a company called The Loan Modification Team, which is offering to modify his mortgage at a lower monthly payment, with a fixed interest rate. He currently has an ARM, which is, in my opinion, a dangerous position to be in at this point in time.
Do any FReepers have info on this company specifically, or this practice in general, to offer, as he attempts to make a good decision? His current monthly payment is pushing his budget to the limit, and he is NOT behind in his payments, so there is no foreclosure in play. However, his total loan value is under $60,000, so most refinancing companies won't touch his loan as it is too small.
Is this a good way to go?
Thanks!
Mama25
Do any FReepers have info on this company specifically, or this practice in general, to offer, as he attempts to make a good decision? His current monthly payment is pushing his budget to the limit, and he is NOT behind in his payments, so there is no foreclosure in play. However, his total loan value is under $60,000, so most refinancing companies won't touch his loan as it is too small.
Is this a good way to go?
Thanks!
Mama25
Sounds like they are mortgage brokers.
I’d recommend he talk to local real estate agents and attornies and see if this company is well known in the area.
Note. Only the original lender can modify the mortgage. Anything else is a new loan - known as a refi.
Now is a good time to refinance to a permanent fixed rate 15 year mortgage.
Be sure to use a local title agency or closer.
Caveat Emptor....
Contact a major bank and get a fixed loan. 5% at 1 point is widely available with good credit.
Scam scam scam scam. Umm...it’s a scam.
Never do business with any financial firm who approaches you.
It is only a marketing move. Not a scam if he can get a better deal than what he has. I have been in the mortgage business and ARMS are a good thing for some people and not so good for others. Right now, I have an ARM and it is at 1.173% this month.....not a bad deal.
If he can lower his payments and make his cash flow situation work out for him it may work to his benefit. He does have the option to go to his local bank or credit union and negotiate the terms there...he can negotiate the rate, the interest rate, and the amount of years the loan is for as well. Mortgages are works of art we have control over. Tell him to negotiate and get a couple of opinions and to get some good faith estimates from a couple of places and tell him to be the BULL in the china shop when it comes to negotiating his terms.....he shouldnt pay much to get this done....banks should be happy to have his business.
floating 60k on a variable loan is not that much of a risk and the likely premium paid in the form of a higher interest rate to fix the loan is a waste of money. Tell him to take the extra money he would pay monthly for a fixed and add it to the loan payment.
Cash flow is a definite problem here - the budget is tight, and the credit is not great. Does he still have options with local banks, etc?
No. If he can’t get a lower, fixed-rate mortgage from a local bank or from one of the national banks, then no legitimate business can get it done for him. If he has a regular income and is not behind on his payments, and has a decent credit score, he should be able to walk into the nearest bank to his home that offers mortgages and get a good one. He doesn’t need a “refinancing company”, he needs an ordinary everyday bank. They couldn’t care less if the mortgage loan they’re making is for a new purchase or a refi. Has he tried to get a new mortgage the normal way and been turned down?
I’d agree with your advice. On a 60k loan, even if it reset higher someday, it won’t hurt too much. In the meantime, take the money it would cost to re-fi, and the higher payments he’d be willing to take on to get a fixed, and just burn the mortgage.
He should certainly TRY local banks. They may be able to give him a conventional mortgage, but at a higher rate than what’s currently prevailing for borrowers with good credit scores. What’s the loan-to-value percent? Is this a house he bought fairly recently, or does he have some equity built up in it? If the appraised value and a refi of just the existing mortgage amount would result in a loan-to-market value of less than 80%, he’ll have a bit more wiggle room when it comes to the credit score.
Your friend should look into getting a fixed rate loan at a local Credit Union. He/she should be able to get into a credit union either through his job or in his local community. Credit Unions have great rates, great service and do not care how low his balance is. The Credit Union motto is people helping people!!
TV & radio are now flooded with come-ons from companies who are trying to pass themselves off as Government-sponsored agencies out to help people with their mortgages. They use buzzwords that most people have heard of, i.e., "Loan Modification" or operate under a business name that sounds "Governmental", to add credibility. I'd be willing to bet that these are just mortgage companies who've changed their name(s) and are trying a different angle to market their loan products.
Take another one I heard today (paraphrased), "The Federal Government has provided us with financing to lend to borrowers with only 3.5% down." Um, that's an FHA loan that you can get practically anywhere.
I know they're just trying to make a buck, but after witnessing the subterfuge firsthand, it irks me to no end. /end rant
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