Mortgage modification on non-reaff bk 2008

[Auto_Body_Chick]

Lets say I wanted to get a mortgage modification on a non reaffirmed mortgage. I was single when I filed but now I am married. Would it just be MY income that would be considered since my DH never had anything to do with the mortgage? We got married in 2010 and I was discharged in 2008.

 

Thanks!

[SportsNut]

Nope, sorry... not just your income, Mods are based off of household income. Even if you weren't married (just as example) and had a live in partner, that income would still legally count toward qualifications for a Mod. The good news is, they take many factors into account even private school tuition and many other expenses that aren't part of a std mtg qual.

 

Additionally most Mods will require the 2nd mtg to Mod before a 1st will Mod. So don't immediately write this off, there may still be decent options for you. Who is the mtg holder? Also, what type of loan is it? (FHA, FNMA, VA, Conv, etc). With this info might be able to give you a bit more insight as what to expect.

[Auto_Body_Chick]

Darn it!!

 

It's a FHA w/ Wells Fargo.

 

My husband works in construction and last year was awesome for him. This year, he basically just started working. If they see last years tax return they are going to tell me to take a hike, but there is no way we're going to make what we made last year.

 

So, there is no point of him opening his own account for his paycheck, right? I was just going to try to pay for everything w/ my check and let him keep his since it was my mortgage that I was trying to modify.

[SportsNut]

They won't use last yr's tax return, it will be based on recent pay stubs. They may eventually ask for last yr's return but this shouldn't have an impact. FHA doesn't offer some of the same options as FNMA and other mtgs. Part of the entire thing about a modification is due to hardship, like loss of income. They also usually take into account net pay and net of all expenses and they will usually consider things like private school, no matter how expensive it is so you may still qualify. It costs you nothing to find out what the options are and there is really no downside that I know of.

 

FHA's priority of offers are something like this:

 

Repayment plan, meaning temp hardship but you can catch up the pymts over 6 months or so. Forebearance plan, similar to repayment plan with a lower pymt but a balloon pymt at the end. Modification. You'll have to be 3 or more pymts in arrears and have a documented default reason, not just we didn't want to pay. PMI claim - This is when they make a claim against the mtg ins to catch up you pymts <nice>. Hamp mod, similar to mod above. Short Sale and Deed in Lieu of Foreclosure. Usually the last two options will result in a cash incentive for moving exp, etc, not to mention many, many months of free living expenses.

 

OR Foreclosure, whcih again will result in a yr or more of free rent. Just how it is in most areas. Short sale, Deed in lieu and Foreclosure will all ruin you for a future mtg from FHA for 3 yrs from date of transfer but this doesn't seem to be an issue for ABC; great. Seems like it is a matter of playing out the system until you are ready to do something else. No hurry.

Edited June 20, 2012 by SportsNut

[sirrowan]

I don't understand. If you have negative equity, the schools are horrible, etc. perhaps is your opportunity to get in a better house with better terms in a better neighorhood with better schools.

 

Just saying.....

[SportsNut]

I don't understand. If you have negative equity, the schools are horrible, etc. perhaps is your opportunity to get in a better house with better terms in a better neighorhood with better schools.

 

Just saying.....

 

The point of a modification is possibly creating equity or an equitable reason to continue to make pymts (lower ones) and not impact the RE mkt or economy in a negative manner. WIN-WIN-WIN. So if ABC were to be motivated financially to continue to stay in the property, making lower pymt for her, allowing her to continue the private school tuition, the lender avoids another REO and a huge loss, and her neighbors avoid further blighting upon the other surrounding properties, therein potentially saving other properties if values don't fall further, and eventually she sells the property for break even or better. This is the potential in everyone of the upside down houses. Strip or settle for less the overvalued and under water 2nd mtg is a good place to start in most case.

[sirrowan]

I don't understand. If you have negative equity, the schools are horrible, etc. perhaps is your opportunity to get in a better house with better terms in a better neighorhood with better schools.

 

Just saying.....

 

The point of a modification is possibly creating equity or an equitable reason to continue to make pymts (lower ones) and not impact the RE mkt or economy in a negative manner. WIN-WIN-WIN. So if ABC were to be motivated financially to continue to stay in the property, making lower pymt for her, allowing her to continue the private school tuition, the lender avoids another REO and a huge loss, and her neighbors avoid further blighting upon the other surrounding properties, therein potentially saving other properties if values don't fall further, and eventually she sells the property for break even or better. This is the potential in everyone of the upside down houses. Strip or settle for less the overvalued and under water 2nd mtg is a good place to start in most case.

While considering how her situation affects those around her would be quite noble of her, we are talking about HER situation.

[goturtlego]

I disagree that they won't ask or won't use your former tax returns in the equasion. They want to see what you have made and Citi did ask for our past 2 years of tax returns along with paystubs as well as 2 months of bank statements. Now if you have 1 year showing a major hardship vs the other really good year, that would certainly help.

 

When you call to apply theu will let you know. But if recent paystubs show a decrease in pay that *should* be good enough.

[SportsNut]

I disagree that they won't ask or won't use your former tax returns in the equasion. They want to see what you have made and Citi did ask for our past 2 years of tax returns along with paystubs as well as 2 months of bank statements. Now if you have 1 year showing a major hardship vs the other really good year, that would certainly help.

 

When you call to apply theu will let you know. But if recent paystubs show a decrease in pay that *should* be good enough.

 

What I meant by not using the former tax returns is, they aren't going to factor the income in at all. They will obtain an IRS Form 4506 T, which is a transcript of your two prior yr tax returns. As e.g., let says that you made 200K last yr and the prev yr and now 50K this yr... that demonstrates a hardship. The 200K that you have made in yrs past doesn't really factor into whether you get a mod or not, but the returns will show things like interest and divident income along with other assets that may difficult to hide... that is why they look at the prior yr's returns.

 

The BEST policy when applying for a mod is, be honest and straight forward. If you qualify, GREAT. If not, you are in no worse shape than you were in before. Just don;t fabricate the truth... the stakes are too high.

[Auto_Body_Chick]

What do I do now? I'm scared to call and don't know what to say. How do you say you're debating between moving to a new house and letting them FC, or getting a modification, which I'm not going to reaffirm on. Ugh. This is scary. Should I wait a few months to apply for a mod, so I buy myself some more time here, or should I just be forthcoming?

Edited June 27, 2012 by Auto_Body_Chick

[cinderella]

I disagree that they won't ask or won't use your former tax returns in the equasion. They want to see what you have made and Citi did ask for our past 2 years of tax returns along with paystubs as well as 2 months of bank statements. Now if you have 1 year showing a major hardship vs the other really good year, that would certainly help.

 

When you call to apply theu will let you know. But if recent paystubs show a decrease in pay that *should* be good enough.

 

What I meant by not using the former tax returns is, they aren't going to factor the income in at all. They will obtain an IRS Form 4506 T, which is a transcript of your two prior yr tax returns. As e.g., let says that you made 200K last yr and the prev yr and now 50K this yr... that demonstrates a hardship. The 200K that you have made in yrs past doesn't really factor into whether you get a mod or not, but the returns will show things like interest and divident income along with other assets that may difficult to hide... that is why they look at the prior yr's returns.

 

The BEST policy when applying for a mod is, be honest and straight forward. If you qualify, GREAT. If not, you are in no worse shape than you were in before. Just don;t fabricate the truth... the stakes are too high.

 

FHA only requires tax returns if a borrower has benefit income such as SSI or pension. The underwriter needs to know the taxable versus non-taxable to determing the portion of the benefit income to gross up.

 

There is no other instance the FHA requires tax return, although they will require a properly completed 4506-t. The 4506 t can be executed in lieu of the tax return for benefit income, however tax return is always the best. There could be internal issues executing the 4506t that will delay the file or it could be around tax time when the IRS is buys and is accordingly swamped delaying the transcript.

 

Almost every other investor will require tax returns. Sportsnut is right, one of the reasons is to check for undisclosed income, undisclosed assets from the schedule B for an imminent default review,in addition to property address and verifying occupancy. In cases of an imminent default review where the hardship must be proven, if the borrower states a reduction in income as the hardship and based on the most recent tax return the current calculated income is equal to or higher than the amount the borrower claimed on the tax, it is generally a decline.