Want to modify mortgage? Get a trial run

By Marcie Geffner - Bankrate.com

As if a borrower didn't face enough hurdles in the quest for a mortgage modification, now there is another. It's the required "trial period" of the federal government's Home Affordable Modification program, and it may be a feature of other mortgage modifications as well. The typical trial period lasts three months and allows the loan servicer to test the borrower's ability to make the modified loan payment before finalizing the modification.

Loan servicers have sent out more than 300,000 letters to homeowners who might qualify for a lower mortgage payment through the government's program, according to the U.S. Treasury Department. If you received such a letter or expect to participate in a mortgage modification program, you may be curious about the trial period requirement. Here are 10 questions and answers:

1. Is a trial period required to get a mortgage modification?

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Your guide to 'foreclosure rate' and other distressed terms.

By Marcie Geffner - California Real Estate

Short sales and bank-owned properties are likely to be a fixture in many California housing markets for the foreseeable future. That’s why REALTORS® need a better than-basic knowledge of facts and figures that relate to these properties, so they can obtain more listings, close more transactions, and differentiate themselves from their competitors.

“It is not inconceivable that in California, at least for the next year, virtually all of the opportunities for most agents will be some sort of distressed property sale,” says Rick Sharga, vice president of marketing at RealtyTrac in Irvine.

“Like it or not,” adds Sean O’Toole, CEO of ForeclosureRadar.com in Discovery Bay, “you have to come up to speed on this information.”

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Is the 40-year mortgage a joke?

By Marcie Geffner - Bankrate.com

It's true: A 40-year mortgage can make your monthly house payment more affordable. But mortgage brokers say such long-term loans generally aren't the best choice for most borrowers because they typically come with a higher interest rate and cost more in interest over the lifetime of the loan.

This trade-off between a lower payment and higher costs is so unattractive that Jeff Lazerson, president of online mortgage broker MortgageGrader.com, says the 40-year mortgage is "a joke."

"Amortizing a loan over 10 more years does very little to decrease the payment, and the industry has historically priced 40-year loans more expensively than 30-year loans, so the benefit that the consumer perceives they should get, they don't get," he says.

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Can you get an Obama loan modification?

By Marcie Geffner - Bankrate.com

Borrowers who can't afford their mortgage payment may want to take a look at the Home Affordable Modification program, which is part of the Obama administration's Making Home Affordable plan.

The Home Affordable Modification program creates a uniform process for loan servicers to modify existing mortgages for homeowners who meet the following two conditions:

• They spend more than 31 percent of their income on monthly housing costs.
• They already are delinquent or in imminent danger of default because of a major change in their financial situation.

The rules are complicated. The federal government has issued top-level guidelines, but Fannie Mae and Freddie Mac have their own specific guidelines. In addition, lenders, loan servicers and mortgage insurers may have their own requirements as well.

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