Debt Free or Bust

Mortgage modification trial period started

This is the 4th post on the topic of my mortgage modification. You may read the previous 3 articles at the following links:

  1. Eligible for mortgage nodification
  2. Qualified for mortgage modification
  3. More on mortgage modification

I met with my HUD mortgage counselor yesterday morning and finished the paperwork required to put the modification trial period in motion. I mailed the first check with the modified payment and FedEx-ed the paperwork to Chase Home Finance at lunch. The payment goes to a different address than the paperwork.

My original payment was $951/mo. and my modified payment is $691/mo. That’s a monthly savings of $260/mo and will more than cover the electric, gas, water, sewer, and solid waste bills. I’ll have $90-$100 left over to put toward groceries and out-of-pocket medical expenses.

This first payment starts my trial period and is due on December 1, 2009. The second payment is due January 1, 2010; the third is due on February 1, 2010; and the fourth and final trial payment is due on March 1, 2010. If I make all these trial payments on time, my mortgage modification becomes permanent.

According to the paperwork Chase sent, my modification won’t change after 5 years, or if it does, it will not revert back to my previous agreement. It will be at a lower interest rate and perhaps for a longer loan period, but the payment will not change significantly.

Apparently, Chase does modifications a little bit differently than other mortgage companies. I have to make 4 trial period payments instead of 3. I was not required to make a good faith contribution payment, and there won’t be a balloon payment at the end of the thirty year mortgage if I don’t pay off the principal by then. My loan will be extended until the principal is paid.

Bankruptcy Update

I had to go back to bankruptcy court last week to report on my mortgage situation. I caught up my second mortgage payments last week prior to court, and the judge continued my case until February before he agrees to sign off on my second mortgage reaffirmation. He wants to be sure I’m able to keep my house before he allows me to be saddled with a $20,000 secured loan for which I might no longer own the house.

Income Update

I picked up 3 more students by the second week of November, and they cover my monthly income shortfall plus some. I will be picking up some siblings of current students during mid-term exams in December. I’m still keeping up the extra marketing because I still have a few more time slots to fill. I’ll slow down assertive marketing when all my time slots are filled.

That extra money will go to paying my back taxes and allow me to rebuild my emergency fund. The taxes are the only debts I still owe. Everything else was discharged in the bankruptcy, and I’m turning the student loan over to my friend’s parents to handle.

This month, I will have about $200 left over even though I had to catch up the second mortgage and pay a reconnection fee on my phone bill from August. Future expenses won’t be as high since everything is now up-to-date.

I worked out a good deal with the IRS about monthly payments I can afford, just $130/mo. I’m free to pay more at any time, and if or when any refunds are applied to my account, I can renegotiate my monthly payment if I need to free up more cash. I may have to do that to increase what I pay to the state.

I haven’t worked out a deal with the state yet. I’ve been paying them what I can each month, around $30, and they accept my payments and haven’t started harassing me yet. I’m sure they will eventually, but as long as they are receiving payments, they will get to me after others who owe a lot more and are not paying at all.

I want to be clear. I’ll have about $200 left over after I pay the IRS, LDR, pay for the last prescription of the month, make the last weekly trip to the grocery, and replace the radiator in my car. It’s leaking at the top and will fail big-time soon. I’m okay for a little while adding coolant/water mix to the overflow tank when it starts getting low. I have an appointment Friday morning and will drop the car off at the shop Thursday night so they can look at it first thing in the morning and get the parts. I won’t need my car again until Sunday afternoon, so if they have to keep it overnight Friday it won’t be a problem.

Leftover money will go into my savings account.

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November 18th, 2009 Posted by | Bankruptcy, Cost Reductions, Debt Reduction, Earnings Updates | 2 comments

Qualified for mortgage modification

This is the second article about my experience with the HUD mortgage modification program. You can read my first article here: Eligible to apply for mortgage modification.

I met with my mortgage loss mitigation and foreclosure prevention counselor yesterday morning after turning in my information packet. My packet was complete so there were no delays in talking with my mortgage company.

I qualified for the mortgage modification by the end of the session. My new payment will be $260 less than my current payment.

Here’s how it works:

  • Visit HUD website, or call 1-888-995-HOPE to determine eligibility
  • If eligible, contact HUD-authorized local agency for an application. HUD provides names and numbers if you’re eligible
  • Complete application and turn in all required supporting documents
  • Meet with counselor
  • Counselor reviews application and all supporting documents, including a fresh credit report
  • Counselor decides if you meet qualification requirements
  • Counselor calls your mortgage company if you qualify
  • Mortgage company makes a decision for modification, requires more information, or turns you down
  • If you qualify for a modification, your mortgage company recalculates a new payment amount at a lower interest rate and lower principle payments based on your lower income level
  • The modification is temporary based on whether you make your first 3 payments on time. Mine will be due December 1, January 1, and February 1
  • You do not have to catch up the payments you missed before qualifying for the modification
  • Receive packet from mortgage company in the mail, read it thoroughly and take it to your HUD counselor
  • You may be required to make a contribution payment equal to your new mortgage payment or as much as one of your old mortgage payments. I’m not sure about these details. I’ll find out when my packet arrives from the mortgage company
  • Once you make the first 3 payments on time, your modification is in force for 5 years

After 5 years, your mortgage payments go back up, but I’m not certain of the details. They will be in the packet coming from the mortgage company. However, your agreement in 5 years will be a fixed-rate mortgage that will be affordable. This is really important for those who have variable rate mortgages.

If you missed mortgage payments and cannot catch them up before your lender may foreclose on you, it is important to contact your local HUD-authorized mortgage counselor and apply for a modification. This program gives you time to increase your income, pay off other debts and establish savings.

One important note: BEWARE of SCAMS!

Mortgage modifications and refinancing through the federal program is free. Scam artists will ask you to pay hundreds to thousands of dollars and say they can get your modification done more quickly and get you a better deal. Don’t believe it. All that will happen is you and your money will soon be parted, and your mortgage problems will not be solved.

Update

After my bankruptcy, I only have about $8,000 in federal and state taxes to pay, and my mortgages. I’m turning the student loan mess over to my friend’s parents. They are wealthy and can afford it far better than I can.

My current income is up to $2190 per month. I’m still a couple of hundred dollars short of what I will need to pay for everything in the budget each month, but some of the budget can be put off while I increase my income over the next few months.

Last month I made $1950. I’m up $240 from then and I expect to get at least 1 or 2 more students in November. One student will bring in just what I need to meet the entire budget every month. Two students will bring in extra money that I can use to reestablish savings and accelerate paying off my back taxes.

I’m establishing savings first, and then accelerating paying off my taxes. My taxes will go down this year and will calculate out to refunds for 2009 for both federal and state. My refunds will be applied to my outstanding balances, lowering my debts faster.

I am launching another marketing campaign this week to find those couple of students I need. I also have enough to have some business cards printed. I was giving out fliers with my information on them. Now I’ll be able to put fliers up on boards and give business cards out to people who ask about my services.

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October 30th, 2009 Posted by | Bankruptcy, Debt Reduction, Earnings Updates | 5 comments