Principal Reduction Without A Hardship - The New Home Loan Modification | Mortgage

Principal Reduction Without A Hardship - The New Home Loan Modification

by PaulAmos

There is a new type of Home Loan Modification coming soon to your city. This one promises to be easier, faster, and more beneficial to you. You won't need to worry about HAMP or hardship letters or 31% debt-to-income ratios any more. The new home loan modification is a reduction of the principal balance of your loan and it's a direct result of the dramatic revelations of lender mistakes and abuses that have come to light in September and October of 2010.

This is only the tip of the iceberg, though. The biggest revelation of all, the "MERS" loan registration charade, has yet to get much publicity. The MERS charade promises to be the biggest-ever opportunity for homeowners to successfully negotiate with their lender to lower their principal balance and get lower payments and regain lost equity. Once you understand the MERS Charade, you'll understand why.

MERS, or the "Mortgage Electronic Registration System" is a database used by lenders to track the sale of mortgages in the secondary mortgage market. Realizing they were going to pay possibly billions of dollars tracking multiple sales of mortgages (called an "assignment"), the lenders developed MERS to track mortgage sales and avoid having to file assignments at the county recorder's office each time a loan was sold. With over sixty million loans being sold, some more than one time, this represents a huge cost savings and dramatic gain in efficiency. The only problem is that it's illegal!

You see, because the loans were sold on the secondary market, the original lender is no longer the owner of the note. Also, lenders tried to say the MERS is the owner and can foreclose, but in reality, MERS is only a "nominee" of the lender. By law, only the actual owner of the loan can foreclose. Neither the original lender or MERS have the legal standing to bring a foreclosure proceeding against a defaulting borrower.

There is no more hardship requirement, no more income qualification, no more "trial" modification. You don't have to wonder if your lender is going to arbitrarily deny you for reasons you can't fathom. It does help the negotiation process if you are underwater to some extent, but this is not required. Also, you don't have to be behind in payments. You simply approach your lender with your negotiation request and find out what they'll be willing to negotiate.

What does this mean for the homeowner? Well, because the originating lender doesn't own the loan and MERS doesn't own the loan, neither of them can foreclose! And, the loans have been sliced and diced so much that it's impossible to piece the actual ownership of the loan together.

Now, with the MERS problem that lenders have created for themselves, lenders are faced with having no recourse if a borrower defaults on a loan. If a loan was registered in MERS, the lender can't foreclose. Because of this, lenders are capitulating when borrowers request a reduction in principal balance. Lenders realize that they could be faced with a total write-off of the entire loan balance and are willing to write down a portion of the loan balance in order to salvage something out of the situation.

The lenders have realized their mistake and are now capitulating to homeowner negotiations for loan reductions. They have no other choice. Faced with having to write off 100% of the loan vs. getting a new loan with a much lower loan balance, lenders are taking what they can. They'll give you a loan reduction without putting up much resistance or forcing you to jump through excessive hoops.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Paul Amos is an Author living in Sydney, Australia He is interested in reading his latest website is about free advice to make your house moving experience less fraught la gran mayoria de juegos gratis