Loan Modification Not Foreclosure

Hector is a gardener and Maria is a hotel maid. Their one son, Thomas, is a first grader.

• Property: 2 bedroom ranch house
• Purchase price: $145,000
• Loan amount: $135,000
• Loan to Value: 125%
• Credit score: 620
• Debt to Income Ratio: 45
• Solution: Loan Modification
• Old payment: $1,130
• New payment: $651

Situation: Hector and Maria qualified for a stated income loan and finally bought a house of their own in Phoenix, just before real estate values started to drop. Hector’s income started to fall as many of his clients started to trim their budgets and do their own yard work. Maria used to work full time as a hotel maid, but with the drop in tourism her hours have been cut back. They are both still working but only part time.

They were in an adjustable rate mortgage (ARM) with a teaser rate. At the first adjustment, they were appalled. Hector called the servicer asking what happened. Told that everything had been spelled out in the agreement, a sinking feeling came over Hector. Maria and Hector both vividly remembered that the mortgage broker who helped them qualify told them that they would be able to refinance if the rate adjustment got to be too burdensome. With the fall in local home values, however, they couldn’t refinance. It was the first time that Hector heard that you could be “underwater” in a house if you lived in the desert. They managed to trim expenses to the bone and make the new higher payments, but their working hours got cut further. They knew that the day of reckoning was at hand when they took out a credit card cash advance to make a mortgage payment only to see their credit card rate shoot up.

After an online search they arrived at MortgageOutreach.org and learned that they couldn’t refinance but that with the number of foreclosures in their neighborhood their servicer was more than willing to work with them on a loan modification. Hector and Maria are now in a 40-year fixed mortgage at $651 a month.

They both realize that they’ll probably be ready for a reverse mortgage before they pay this off, but they’ve kept their home and Thomas still can continue to attend his local school where he’s started to make friends and learn how to read.