Getting Rid of a Timeshare

Published on November 9, 2014 by in Blog, Featured

Anthony J. Vignier

It’s exciting when you get a time share, you’re on vacation and get caught up in the moment, however, later, getting rid of a timeshare can be challenging. In addition to the non-ending monthly or annual fees, timeshares are unique in that most timeshare obligations are binding upon your heirs. The three main options for getting rid of an unwanted timeshare is through a sale, donation or transfer.

Option one: sell your timeshare. Selling a timeshare is difficult because there is a glut of timeshares in the market. Your instinct not to trust the companies that promise to sell your timeshare is on the mark. There are many timeshare brokers and buy-back programs, but many of them are scams and are likely not to deliver on their promises to sell your timeshare. You should not give any company any money upfront, regardless of the amount, to sell your timeshare. The only companies that you should deal with are the ones that don’t charge an up-front fee and pay you only after they sell your timeshare. If you find a reputable company that will agree to try to sell your timeshare make sure that the sales brokerage agreement confirms that in addition to selling the timeshare that you will be released from all timeshare fees, dues and expenses and that the fee for finding a buyer will only be paid if these stipulations are met. You don’t want to find out after you sold it that you still have to pay a recurring fee. Another option is to try to sell the timeshare by listing it on sites like eBay or Craigslist – but this involves dealing directly with strangers and navigating the entire transaction on your own. Finally, what may be best for you is to try to sell the time share to a relative or friend. A relative or friend with a larger family may make good use of the timeshare. Typically you can sell the timeshare for $1 and then contact a timeshare closing and escrow company to assist you with the transfer of title. You should determine all the transfer fees that will be imposed including those by your time share company ahead of time.

Option two: donate the timeshare. There are well known charitable organizations that accept timeshare donations. You can call your favorite charity or search for organizations that accept timeshare donations online. In addition to the satisfaction of helping a good cause, the donation may be tax deductible, however don’t expect a huge write off. The deduction will depend on the fair market value of what a knowledgeable buyer would pay for your timeshare not the original purchase price or what the resort is now charging for similar timeshares. In most cases this can be a small amount. In addition, be aware that the transaction costs can be up to a few thousand dollars.

Option three: transfer the timeshare back to the timeshare company. In most cases, the company that sold you the timeshare will not want to take it back, but if you own the timeshare outright with no loan it is possible that the company may agree to take it back. Just be sure they are completely releasing you from all obligations including all maintenance fees, dues etc. If they don’t want to take it back a real estate litigation lawyer can assist you by contacting the timeshare company on your behalf. A letter from a lawyer can be a great motivator. When faced with litigation or the potential of litigation, timeshare companies may in fact either take back their timeshare or simply agree to release the timeshare owner from any future liability in connection with the timeshare contract. Of course the drawback here is that hiring a lawyer costs money and there is no guarantee of success.

If there is a loan and you owe more money than what the timeshare is worth make sure that in whatever manner you transfer it that the loan is paid off otherwise you will still be liable on the note even if title was changed over. If later, payments are not made on the loan the lender will likely file suit and obtain a deficiency judgment against you. A deficiency judgment will appear on your credit history and the creditor is likely to ultimately obtain a lien on real estate that you own, seek to collect against other assets or seek a wage garnishment. For example: You owe $20,000 on a time share. Payments are not made. The lender forecloses and sells the time share for $5,000. The lender has lost $15,000. This is the deficiency. Depending on state law, the lender may likely be able to sue for this deficiency. The lender then can get a judgment against you for the deficiency and perhaps legal fees and court costs.

In the end, and in most situations, what may be the most practical thing for you to do is to either transfer the timeshare to a relative or donate it to a charity. This avoids the hassle of trying to sell the timeshare or the angst of trying to force a transfer to the timeshare company. Good luck!

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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Severance Packages

Published on November 9, 2014 by in Blog, Featured

Anthony J. VignierWhat can you do when a company has announced layoffs, but asks you to work for several more months in order to receive a severance package? I plan to stay and make arrangements for new work based on the termination date. I fully understand I can be let go at any time for cause, but absent that, can I protect myself from an earlier-than-anticipated termination?

I am sorry to hear about your situation which has become all to common to many people. All severance packages tend to be unique not only to a company, but also unique to each individual in that company for whom a severance package is offered. A severance package is an agreement or contract between an employer and an employee. A severance package is often granted to employees upon a termination of employment based on the amount of time that the employee has worked for the company, and it can include benefits for unused vacation time etc. Because an agreement is a contract it can often be open to negotiation even when one side says that it is not. Before signing or agreeing to anything you should take time to consider your options. Policies for severance packages are often found in a company’s employee handbook. That’s where you should look first. Many handbooks have written severance plans that don’t require you to sign anything including a release or non-competition agreement. A severance package may be giving you something you are already entitled to in which case why sign anything. After looking through your handbook, read the severance contract carefully.

After reviewing the employee handbook and the severance contract, go to an attorney, preferably one the focuses on employment law. Having a professional advise you on your specific situation will be worth the consultation fee. Sometimes severance agreements may stop you from bringing future lawsuits against the employer for claims such as employment discrimination, sexual harassment and payments owed such as bonuses so this something also to consider. Other points to consider, aside from payments and the termination date are taxation issues, payment for unused vacation, personal and sick time, agreed language for reference purposes, health insurance benefits, scope of non-competition, non-solicitation and non-disclosure obligations, and consideration of unemployment insurance benefits. Severance contracts can stipulate that the employee will not sue the employer for wrongful termination or attempt to collect unemployment insurance with the consequence that if the employee does so, then the employee must return the severance money – so watch out for this. Depending on what the lawyer recommends for you, you then have to decide whether to have the lawyer or you yourself negotiate the package. This can be a difficult decision and it should be based on what you are comfortable with and what’s at stake. Many people find it difficult to advocate for themselves so having someone speak for you can be worth it. On the other hand keep in mind that if a lawyer writes a letter or contacts the company to negotiate the package, management is likely to forward the matter to corporate counsel who can be more difficult to deal with and your legal fees can mount.

In your case, you want more certainty with regard to when your employment will actually cease. The fixed date of termination that was given to you is meaningless because of the language that the termination date can be “at some other date to be determined by the company.” You should consult with a lawyer and then, unless other options exist in your case, either you or your attorney should try to negotiate a solid, fixed date with no wiggle room so that you can plan your job search and know up to what date you will get paid. Hand in hand with a fixed date you can suggest that language be inserted providing you and your employer the option to negotiate additional time when that termination date arises. This will allow you to make plans and can also be helpful to the company as well since in many cases companies underestimate the time that they may need an employee to stay on.

One more thing when a new position does arise at another company, as uncomfortable as it may be, that can be the perfect time to negotiate a severance package with that company. Good luck!

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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Student Loan Prepayment Options

Published on November 8, 2014 by in Blog, Featured

Anthony J. Vignier
What are some student loan prepayment options?

First you should know that all education loans allow for prepayments to be made without a penalty being assessed. This means that you can make extra payments to reduce the principal or even pay off the entire balance at once, without having to pay a fee. Also be aware that when a lender receives any payment on a loan, the payment is applied first to late charges and collection costs, if any, then to outstanding interest and then to outstanding principal. The lender can also apply an extra payment towards the next payment due. For these reasons, I recommend that when making an extra payment that you include a notation on the memo section of your check specifying that you want the prepayment applied to the principal. If you have several loans with the same lender you should also specify which loan the extra payment is to be applied to. Keep a copy of the check in the event the extra payment is misapplied.

Second, when advising someone on a debt payment plan several factors must be considered such as determining their annual income and expenses, whether the individual has an established emergency fund, reviewing other outstanding debt such as credit cards or auto loans that may have higher interest rates, funding a retirement plan, if possible, and taking into consideration tax issues such as the student loan interest deduction. Keeping in mind that even with the best current savings rates averaging 0.80 (that’s less than 1% per year) the best use of your money is to pay down higher interest debt such as this student loan and apply any available extra funds to paying down the principal. In almost all debt situations you want to apply extra payments to the principal not the interest. Prepayment of the principal saves money because subsequent monthly payments will further reduce the principal regardless if an extra payment is made in the future. Prepayment of the principal also reduces the total interest that you will pay over time.

Paying off student loans is one of the best financial moves a person can make. By paying off student loans a person clears the way for other financial objectives like buying a home and saving for retirement. In addition, unlike most other debt, student loans are very difficult to discharge in bankruptcy so paying them off should be a top priority.

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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Anthony J. Vignier
The following question was recently asked: My spouse passed away. The mortgage is in their name. I have been making the payments on the mortgage. I have been told to put the mortgage in my name. I have not notified the mortgage company because I am afraid there will be complications. My salary will not qualify me for a mortgage on my own. What should I do?

My condolences on your loss. It is difficult to deal with the death of a loved and have to make serious financial decisions on top of that.

There are two issues here that you have to consider. First is a cash flow situation. You need to assess your expenses, income and liquid assets to come up with a sound financial plan that will secure your financial situation. For this part, I strongly recommend that you meet with a Certified Financial Planner who can review your situation and make recommendations.

The second issue is the existing outstanding mortgage. First I have to tell you that the mortgage documents should be reviewed by an attorney for specific advice on what they specify. However, in general, you should know that a lender on the death of a borrower can usually call the loan under a due on sale clause, but, if you are making the mortgage payments the lender is not likely to call the loan. Also as a surviving spouse you do have legal federal protections under the Garn St. Germain Act. This is a 1982 federal law that allows a surviving spouse to keep a mortgage originally obtained by the deceased spouse. There is usually a requirement that you notify the lender of your intention to keep the loan. This notification can be time sensitive so you shouldn’t wait much longer. You should speak with an attorney to consider the best options available to you and if need be contact the lender on your behalf. Because you said that you can’t qualify for a mortgage and being that you may be able to keep the existing mortgage the other consideration will be looking at the current interest rate on the mortgage and making a decision whether to keep it or pay it off. Again, working with your attorney and a Certified Financial Planner will help you make informed decisions.

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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Anthony J. VignierHow can I protect my assets in New Jersey if I am found to be at fault in an accident case?

Great Question! Asset protection considerations are in my opinion one the first steps in a plan for building wealth. America in general and New Jersey in particular is a very litigious place. The more assets people think you have, the more tempting a target you will become in a lawsuit, particularly an automobile accident case. Remember, attorneys who practice personal injury usually are paid on a contingency basis, typically 1/3 of what they are able collect for their client along with the costs and expenses associated with the case which the attorneys usually pay upfront. This means two things, namely cases that are accepted must involve significant damages to their client and ideally they want cases where there are “deep pockets”, meaning there is the potential for immediately collecting big money at the end of the case, usually from an insurance carrier. When insurance is limited or non-existent and a judgment is obtained collecting against the judgment does have its limitations.

In general, an auto accident judgment holder must first go against the individually-owned debts of the judgment debtor. If those assets cannot satisfy the judgment, they will then try to go after jointly-owned assets. In this case, the judgment holder can only go after the debtor’s portion of jointly-owned assets. In such situations the non-debtor owner will have to establish their percentage of ownership so that it is excluded from collection. If you are married your home is likely to be held as tenants by the entirety, meaning that both you and your spouse own what is called an indivisible interest in the property. If only one of you is named in a suit, creditors cannot force the other spouse to sell his or her interest in the house. Even if jointly-held property, such as real estate, cannot be seized, the judgment can however act as a lien on the asset which can prevent the sale or refinance of the property until the judgment is satisfied.

Can your retirement funds be at risk to pay a judgment? A majority of many people’s assets are held in retirement accounts. The good news is that while some retirement accounts can be subject to a judgment, a majority of retirement accounts are not. Retirement accounts set up under the Employee Benefits Security Administration (ERISA) are protected. A 401(k) plan is an ERISA account. A 401(k) plan takes its name from the section of the Internal Revenue Code of 1978 that created them. A 401(k) plan is funded by employee pre-tax salary contributions and often matching contributions from the employer. Contributions grow tax-free until withdrawn and the funds in these plans are portable, meaning that generally you can take the money with you when you leave your employer, typically by rolling it over into an Individual Retirement Account (IRA) or another 401(k). The exception to this protection from judgments is in the case of divorce decrees or child support orders (QDROs; i.e., qualified domestic relations orders).  IRAs like the traditional IRA and the Roth IRA are not covered by ERISA but New Jersey, unlike many other states, does offer protection to these IRA accounts from claims by judgment creditors including garnishments.

Are Social Security and disability benefits at risk? Social Security benefits and most disability benefits in general are also protected from judgments. A judgment-creditor cannot garnish your Social Security benefits except for money owed to the federal government such as student loans. Such an action violates Section 207 of the Social Security Act (42 U.S.C. 407). Social Security benefits that are directly deposited into the account are protected up to a value of two months’ worth of payments. So if benefits have been deposited and have accumulated beyond that amount then they may be seized if the excess sits in the bank account.

Another source that a judgment holder may seek to collect against is your wages. New Jersey law does limit the amount that a judgment holder can take from your wages for payment against an outstanding judgment. A creditor can take money from wages through a wage garnishment which results from an order from a court or a government agency that is sent to your employer. In New Jersey wage garnishments are limited so that only 10% to 25% can be taken from your wages.

So what are some protective measures that a person can take against a possible judgment or liability? Calculate your net worth at least on an annual basis and consider taking the following steps:

  1. Max out your auto insurance. Don’t settle for the minimum legal liability coverage. Get as much coverage as is affordable to you. As a general rule of thumb, make sure your total liability coverage is at least equal to your total assets.

 

  1. Supplement your auto and homeowner’s insurance with Umbrella Insurance. Umbrella insurance is backup insurance that can be used in the instance that your other coverage is inadequate. In the event that your auto, homeowners, or other liability coverages are exhausted, umbrella coverage pays benefits up to the limit of the policy. For example, if you have $500,000 in auto liability and also own an umbrella policy for $1,000,000 and you get hit with a $1,000,000 judgment, your umbrella policy will pick up the additional $500,000 in coverage. Umbrella policies can be underwritten for $1,000,000 to $5,000,000 in face value and this insurance is very affordable. Anyone with any assets to protect should have an umbrella policy.

 

  1. Max out Retirement Accounts to protect your assets. As stated before New Jersey and Federal law provide unlimited asset protection to ERISA-qualified retirement plans, and IRAs.  Therefore a good strategy, subject to establishing a six month to one year emergency or rainy day fund, is to maximize your contributions to your IRA or 401(k). Note that you will be restricted by annual contribution limits, which vary depending on the type of retirement plan. Retirement accounts are excellent vehicles to protect long-term savings, and provide substantial tax benefits, but need to be thoroughly understood and used with care.

 

  1. Review your deed and see how your home and other real estate and property are titled. You should consult with an attorney regarding your potential risks and whether changing the title to assets may be a consideration. Professionals such as doctors, dentists and lawyers should consider this option.

 

The major caveat to keep in mind is that once you know of a pending suit or liability that may be forthcoming the protective steps that you can take may be limited; therefore it is wise to take steps before a problem arises. A good financial and wealth protection plan established from the beginning when you begin accumulating assets is your best defense. This can be best accomplished by working closely with your attorney, financial advisor and accountant.

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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Anthony J. VignierIf you receive a class action lawsuit notice in the mail, what should you do with it?

I have had the good fortune of contributing recently to an article published by Karin Price Mueller in the Star-Ledger in which this topic is discussed.

Class action lawsuits serve the purpose of protecting consumers from unfair, dangerous or illegal business practices by addressing small wrongs done to many people. By combining a large number of lawsuits into a single case, the group, or “class” can get experienced lawyers, expert witnesses and other professionals to help them.

Always read any class action lawsuit notice carefully to make sure that you do not have to take any action. By doing nothing you normally ‘opt in’ and will automatically receive something from the settlement – very likely a nominal amount.

Some settlements with a potential for larger individual awards do require that you provide information to calculate your potential settlement amount, so you should review the entire notice and consult with a lawyer if you don’t understand it. But be careful. If you are asked for money, confidential information such as your Social Security number or credit card information to participate in a class action, beware – it is very likely a scam.

There are often case-specific websites created for a class action that post settlement documents and other important information related to the case. Also on the notice or website you should find an email address or phone number where you can contact the lead attorney or law firm representing the class for more information. In your case, the insurance companies may have charged fees or not paid providers like doctors or hospitals on amounts that they were supposed to or done something else wrong that was contrary to their agreement with policyholders and caused losses to the policyholders.

Collectively the damages to the entire class can add up to millions of dollars. Individuals like you may have suffered losses that amount to pennies or it can be hundreds of dollars.

To pursue your claim on your own outside of the class action will probably be very expensive, time consuming and not worth the effort. If that’s your situation, the best course is to do nothing, in which case you should automatically remain in the class and let the case take its course. But, if you ever did suffer a significant loss, you should consider consulting with a lawyer who has experience with your type of case.

Your lawyer can explain the time and cost involved and whether their fees are likely to be paid separately from your award. You can then balance the damage you suffered against the possibility of success and so make an informed decision as to whether you should opt out of the class action lawsuit — if that’s an option.

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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Anthony J. VignierI am often asked by my clients who are facing foreclosure how credit score is affected by foreclosure and if a short sale, deed-in-lieu of foreclosure or filing bankruptcy is a better option with regard to the effect on their credit score. First one must keep in mind that there are other issues to consider in addition to how the foreclosure will affect your credit score such as tax consequences from the foreclosure and other factors outside of your credit score that lenders will look at in order to provide you with loans and financing in the future.

 

From a practical standpoint, the effect on your credit score resulting from a short sale, foreclosure or bankruptcy, are ultimately very similar. According to Fair Isaac (also known as FICO), your credit score when facing a short sale, foreclosure or deed-in-lieu of foreclosure will drop anywhere from 85 to 160 points. Should you file bankruptcy, your credit score will drop anywhere from 130 to 240 points. If one were just to make a decision based upon the drop in one’s credit score, you would reach the conclusion that a foreclosure is better than a bankruptcy. However, when one considers other factors such a conclusion is wrong.

Credit Score is Affected by Foreclosure
There are two main reasons why a bankruptcy can be preferable to allowing a home to go to foreclosure. First, when a property goes to foreclosure, the debtor still faces the possibility of the lender pursuing the debtor for a deficiency, which is the difference between the fair market value at the time the property is sold at public sale, and what is owed on the mortgage. For example, if the debt is $200,000 on a mortgage and the property is only worth $150,000, the borrower will face a $50,000 deficiency judgment (not including attorney fees, court costs and interest). The bank can then hold this Judgment for 20 years or start collection proceedings against the debtor which may include a wage garnishment. Banks are now more actively pursuing these deficiencies. However, if the debtor were to file for bankruptcy, this $50,000 would be discharged or wiped out and the lender could not go after the borrower for any money. In addition, there is no tax consequence for the forgiveness of this debt through bankruptcy.

A second reason why bankruptcy or a short sale is better than allowing a foreclosure to proceed to judgment and sale, is that the debtor will be able to more quickly qualify for a mortgage in the future. This is because while each bank has its own guidelines, most banks generally follow the guidelines set forth by Fannie Mae and Freddy Mac. The guidelines are very lengthy, but they can be summarized as follows:

1. Under the guidelines, your best option for purposes of obtaining a new loan in the future is to either do a deed-in-lieu of foreclosure (where you transfer the property back to the lender in exchange for a release of any deficiency) or a short sale, where you sell the property for less than what is owed on the mortgage. Under the guidelines, if you have a 20% down payment, you should be able to qualify for a loan 2 years after a transfer by a deed in lieu or short sale. If you are only putting down 10%, you would qualify for a loan after 4 years.

2. Should you file bankruptcy, under the guidelines, you would qualify for a mortgage after 4 years from the date of Discharge. In a Chapter 7, the discharge occurs approximately 6 months after you file and in a Chapter 13, the discharge can come between 36 and 60 months after you file.

3. The worst option is foreclosure under the guidelines. You would have to wait 7 years from the date the foreclosure judgment was entered before you qualify for a loan under the guidelines. Additionally, if a deficiency judgment was entered against you during that time, the deficiency judgment would also have to be paid off prior to you being able to close. Obviously for these reasons, the worst case scenario should you wish to get a fresh start is a foreclosure.

In Conclusion, although from a pure credit score, a bankruptcy may cause a larger initial drop in your score than a foreclosure, in the long run, the Discharge provided by bankruptcy, especially a Chapter 7, may be a quicker and more efficient way to get a fresh start and have the opportunity buy a new home in the future. Keep in mind that the foregoing is just meant as a general discussion of these issues and each person’s situation is different. That is why it is important to always consult with qualified professionals regarding your specific situation.

Also depending on circumstances, some people may qualify sooner for credit or mortgage under the above scenarios while others may take longer. If you, a client, friend or family member are facing foreclosure or other financial issues, please contact me for a free consultation so that I can analyze your position and point you in the right direction.

 

Anthony J. Vignier is an experienced bankruptcy lawyer who gets results for his clients. He can give you guidance for a better financial future. Anthony has over 21 years of legal experience. He is the attorney you want on your side. Anthony considers the situation of all his prospective clients by meeting with them and going over their unique circumstances. After a Bankruptcy is successfully concluded the client receives a Discharge Order that legally removes the obligation to pay back any Debt that was discharged through bankruptcy. Anthony’s clients are able to start fresh after receiving their Discharge. Anthony’s can be reached at (800) 707-5252. His Office is located at 115 Kearny Avenue, Kearny, New Jersey.

 

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HAMP Tier II Loan Modification

Anthony J. VignierA few weeks back I wrote about the Home Affordable Modification Program, “H.A.M.P.”, which can help a homeowner modify their mortgage to an amount that that can be managed through interest rate and principal modification. But what happens if a homeowner does not qualify for the program or has a rental property? In that case, the new HAMP Tier II modification program may give homeowners new options that can help.

To be eligible for a HAMP Tier II modification, you must be a borrower who is not eligible for a regular loan modification, who failed a loan modification, or who applied for and was rejected for a loan modification. If a homeowner failed a permanent loan modification, twelve months must have passed from the effective date of the original permanent modification or the homeowner must have had a change in circumstances.

In addition, owners of rental property can apply for a HAMP Tier II modification for mortgages on their rental property, provided all of the following apply:

  • You own fewer than six single-family rental units;
  • You are in actual default on the rental mortgage;
  • The net rental income on the property is less than the total mortgage payment on the rental property or the owners can document actual hardship;
  • You intend to rent the property out (or have a family member occupy it rent free) for the next five years.

As a homeowner you must be careful about entering into Tier II modification, however, because once you accept the Tier II modification, you are no longer eligible for a HAMP Tier I modification which is the regular loan modification. As a result, homeowners should be extremely careful to make sure they consider and evaluate their eligibility for a HAMP Tier I modification because it generally gives borrowers better affordability protections. Also, if a homeowner defaults on a HAMP Tier II modification, they are not eligible for any HAMP modification.

The new HAMP Tier II loan modification is available on June 1, 2012. Applications must be submitted no later than December 31, 2013, with the permanent modification started no later than September 30, 2014. Be aware that the banks and mortgage companies do not have to tell you about this program so it is up to you, the borrower, to request the application.

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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Mortgage Loan Modification

Anthony J. VignierIf you are an anxious homeowner, worried about making mortgage payments or you are missing mortgage payments there are solutions available. The Home Affordable Modification Program, “H.A.M.P.” can help you change your loan to an amount that you can manage. A mortgage loan modification can mean the difference between keeping or losing your home. Through this program, it is possible to reduce your monthly payments by reducing the interest rate and making the mortgage current by adding any amount that is overdue to the end of the loan.

HAMP is part of a federal law created to assist homeowners modify their mortgages to prevent foreclosures and the loss of their home from foreclosure. A borrower must be either already delinquent in payments or a borrower may be current, but likely to miss a payment soon due to financial hardship. The guidelines call this “imminent risk” of default. Late payments are not a condition to begin the mortgage loan modification process. Also, the mortgage must have closed before the end of 2008, must be senior to any other loans, must be within a specific loan amount, be a one to four family home and must be occupied as the borrower’s principal residence.

When applying for a mortgage loan modification you must demonstrate to the lender that you have an existing hardship that makes it impossible for you to make your current monthly mortgage payment. The hardship must be supported with fmancial and other suitable documentation including your monthly income, expenses and assets. All documentation must be submitted for review by the lender. The lender will ask you for copies of your most recent pay stubs, tax returns and a hardship letter that explains your financial situation and problems. If based on the proofs that you submit you convince the lender that you have a hardship, the lender may agree to change the terms of your loan to make it possible for you to meet your monthly payments.

With eligibility decided, and the mortgage either delinquent or determined to be at risk of default, the lender then calculates the cost of mortgage loan modification versus foreclosure. If the benefit to the lender from modification exceeds that from foreclosure – that is if the modification would cost the lender less than foreclosure – then HAMP, by law, requires that the lender grant the modification. Otherwise, modification is optional. The lender then has to determine what monthly payment amount is affordable to you and acceptable to them. The target monthly mortgage payment must equal not less than 31% of the borrower’s monthly income.

The next step is the Trial Period. The lender offers the borrower a modified payment for a three month trial period. This period gives the lender time to verify and update the borrower’s information and to prepare the final modification agreement. The borrower must accept the trial period plan, supply requested information, and make all payments before the period ends. If the borrower meets all requirements, the modification takes effect on the first day of the month following the trial period. The lender may adjust monthly payments consistent with information received during the trial period. The modification agreement permanently changes the terms of the original loan. Once modified under HAMP, a loan may not be modified again under the program.

The loan modification process can be difficult and everyone’s situation is unique so there may be other solutions or options that tnay be more appropriate. It pays to explore all options, but if you decide to attempt a loan modification you want your application submitted correctly so that it has the greatest chance of success. Make the effort to thoroughly complete a financial statement, and to calculate the various formulas that determine your qualifications. This enables you to give accurate information to your lender. Confirm everything according to HAMP guidelines. Do not assume that your lender’s offer complies with HAMP or that bank personnel understand everything. The loan modification process can be challenging, but if handled correctly, the chances of success can be good.

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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MortgageIf you remember in the past receiving new mortgage payment statements from banks or companies that you never heard of before and wondering if you should send the payment to them, well thankfully, the practice of transferring loans without notice to you, the borrower, has come to an end. Borrowers must now be notified whenever ownership of their mortgage loan has been transferred. This requirement was imposed by the Helping Families Save Their Homes Act of 2009.

 

Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.

 

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