Friday, January 2, 2015

Factors to Consider with Mortgage Modification

Beauvais, and similar recent decision by other courts, may give reason for many Miami homeowners with mortgage foreclosure situations to re-evaluate what is the best course of action to "save" their home from foreclosure.  For many, focus on "foreclosure defense" instead of mortgage modification are misplaced.  

Modified Mortgage Payment 
A HAMP and similar mortgage modifications are typically targeted to be about 31% of gross income. The 31% amount would include principal, interest, taxes, insurance, and association. 

That is, the monthly mortgage payment includes, aside from principal ("p") and interest ("i"),  county property taxes ("t") and the various types of property insurance ("i").  That is, the mortgage lender is not the source of a large portion of the monthly mortgage payment. 

Costs to Homeowner of Not Obtaining a Mortgage Modification
Furthermore, a homeowner should consider the economic costs of delay in the obtaining of a mortgage modification or the losing of their present home with well-intentioned, but unproductive foreclosure defense. A person should considered 
  • what would be the interest rate on a modified mortgage - typically starting at around 2%
  • what would be the interest rate on a new mortgage on a replacement home - if the person is even able to obtain one
  • what is the amount of the property taxes on their present home - is the "assessed value" being capped at a low historical amount by Florida's constitution
  • will the property taxes on a new home be much higher as the "assessed" value will be closer to the market value
  • the costs of moving from the old house
  • the closing costs of a new real estate purchase, mortgage broker, points, and taxes on a new mortgage instrument 
  • accruing high costs of "forced place property insurance" until the mortgage modification is achieve - these may impact the amount of a modified mortgage payment and will increase the overall payoff due at the time of sale
  • raising real estate values may increase the amount of the monthly modified mortgage payment 
  • costs of renting vs. ownership, including its possible income tax savings