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October 24th, 2007 10:50 PM

Dear Friends,

During the past several weeks, we have heard of interesting remedies by financial institutions, the federal government and by members of Congress on actions to help end the overwhelming tide of foreclosures in this country.

The basic premise is to provide a 'loan modification' to all loans that are about to 'reset' to a higher monthly mortgage payment.

It has been reported by mortgage sources that over 3 million borrowers with 'negative amortization' or 'interest only' type loans, will reset to a higher payment during the next 12 months. Up to 50% of this total are doomed to lose their homes through foreclosure proceedings unless a loan modification takes place!

Several major financial institutions like Countrywide are now deciding to help these borrowers BEFORE the reset takes place, by modifying the loan to a fixed payment.

This action is noteworthy as this will help stem the flow of foreclosures and avoid financial ruin for a small percentage of homeowners that have a loan with Countrywide. At least it's a start in the right direction.

However, for the majority of homeowners, we're not so lucky. It must be noted most loans have been sold and packaged to other institutions in the 'secondary market' and are no longer able to help the borrower with a loan modification.

Currently only 1% of these types of loans are modified in this fashion.

The ultimate percentage of modifications offered are very low. Due to this reality, it is highly recommended for homeowners that have a negative amortization or interest only loan to - REFINANCE NOW - before the mortgage payment goes up to over 30% of the current payment.

Our company will do its part to help you in efforts to refinance your house BEFORE a reset occurs. However, you must be prepared.

As you know, the 'credit crunch' we have been experiencing is a direct result of the sub-prime mortgage mess. These problems have lowered property values in neighborhoods and has slowed resales and construction of single family residences.

We recommend the following PRO-ACTIVE steps you should do BEFORE refinancing your current negative amortization or interest only loan:

1. Check your loan documents to see when your mortgage payment 'resets'.

2. Begin the preparation to REFINANCE your loan at least 6 months before it 'resets'.

3. Check your neighborhood and try to ascertain the values of the properties in the surrounding area. You need to know if your property has lost value. You can call a Realtor in your area or call the phone number on a FOR SALE sign near where you live. Compare your home to a similar property. Having similar square footage and lot size is important.

4. SAVE MONEY. Most lenders are requesting for borrowers to have at least 3 to 6 months 'PITI' held for at least a 60 day period in a savings or checking account, 401k, IRA, stock or mutual fund.

For example: 'PITI' means Principal+Interest+Tax+Insurance. If your monthly payment is $1000 - your hazard insurance is $75 - your property taxes are $350 - this would equal $1425.00 per month.

In this equation ($1425 x 6 mos = $8550) you should have up to $8550.00 in reserves in your account(s) for at least a 60 period.

5. IMPORTANCE OF YOUR FICO CREDIT SCORE & THE NECESSITY TO LOWER YOUR CREDIT CARD OBLIGATIONS. It is highly recommended to lower your outstanding balances to no more than 30% of your highest credit limit on any credit card you have.

For example: If you have a credit card with an outstanding balance of $1000 and the credit limit for the card is $1100, you should plan on paying down your card to have no more than a $330 balance. This action alone will help you raise your FICO score to a level where you can obtain a competitive rate on your refinance.

FICO credit scores ultimately help decide the rate you will obtain on any mortgage loan. The higher the score, the better rate you can secure from the lender. Be aware of these tips to raise your score. With many lenders, you're OK if you have a 680 credit score. While others request a 700 or higher depending on the loan size and its LTV or Loan To Value - the percentage of the loan to the value of the property.

For example: If your house is valued at $500,000 - 80% LTV would be a loan for $400,000. The higher the LTV, let's say 90% or $450,000 loan amount, a lender would require at least a 680 and/or higher FICO credit score due to the risk involved.

6. DO NOT BUY A CAR & NEVER CO-SIGN for an AUTO LOAN. During this period, do not purchase a car as this will lower your FICO credit score tremendously - up to 60 points or more! NEVER- NEVER co-sign for an auto loan! After 25 years in originating loans, at least 80% of those borrowers who agree to co-sign for a friend or a family member have ruined their credit. The co-signer many times is late with the payment and eventually the car is repossessed. This credit mess is ultimately reflected on both credit accounts.  


8. ALWAYS MAKE YOUR MORTGAGE PAYMENT. Your mortgage payment is the most important obligation you have. You must make a concerted effort to make your payment in a timely manner - no later than the 15th of each month to avoid penalties - but never over the 30th of the month - even though there may be 31 calendar days. I trust your lender has several options for you to pay your mortgage in the 'nick of time'. If you have numerous bills outstanding and have nowhere to turn, do your best to pay your mortgage above all other obligations.

9. DO NOT QUIT YOUR JOB - DO NOT CHANGE CAREERS. Very simple. Hold off these decisions AFTER your loan is closed.

We hope this information will help you in refinancing your loan. It's better to be prepared NOW before a DENIAL is given by a mortgage underwriter.

Please do not hesitate to call us if you have any questions or concerns.

Thanks Again








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Posted by Jesse Dorado on October 24th, 2007 10:50 PMPost a Comment

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