Mortgage Principal Reduction Refinance

Mortgage Principal Reduction Refinance means refinancing your distressed mortgage at it's new, reduced property value. It is also referred to as a "Short Refinance."

Principal Reduction is a different process depending on whether your mortgage qualifies for the Home Affordable Mortgage Plan (HAMP), or a conventional mortgage.

HAMP mortgages are best qualified with the REST Report v 4.0, that automatically calculates principal reduction along HAMP guidelines referred to as the 'waterfall test.' I am a proud vendor of the REST Report. That process can be found by going back from this page and calling me or submitting my form for details. Call 970-242-2600

The following information on this page is for conventional mortgage financing:

We negotiate your mortgage deficiency with your current lender.

No FICO credit scores are needed. Your home is refinanced on the basis of your residence, or second home, investment. Your new interest rate will be higher, but for the right mortgage holder, the resulting lower monthly payment, combined with the opportunity to become current on monthly mortgage payments and repair your credit, will be a significant benefit. The target property for this program is more than 120% underwater. (Please see examples below.)

The benefit is to refinance again in two or more years after your property values and credit scores are restored. Meanwhile, you keep your home and lower your monthly mortgage payment.

How It Works:
Once a borrower is 60-days delinquent, the note becomes a “non-performing note”, and your bank is penalized by FDIC for holding on to those “toxic” assets.

In the past, banks typically were reluctant to sell mortgage notes for less than their value, and certainly were not interested in negotiating with homeowners.

Due to FDIC penalties, banks are motivated to get these toxic assets off of their books than they have ever been before. Both distressed homeowners and investors win.

The Process:
Negotiations will take place with your bank to purchase the note at a reduced rate (often at 50% of the current mortgage balance). Once the bank accepts our offer, you will receive your new mortgage details and have 72 hours to review and accept the new reduced mortgage. Once accepted you will have a new note and will make your payments to the new note holder. The process generally takes 90 days.

The homeowner/grantor remains on the title for the entire process.

The homeowner still owns the home. The benefit is that the mortgage you are paying more clearly reflects the current market value of your home, rather than what you purchased it for before this current mortgage crisis.

Example:
Home Purchased For:                   $620,000
Current Mtg. Balance:                  $550,000
Current Payment:                        $3,122.84
Current Mkt. Value/New mtg Balance: $340,000
Neg. Equity:                         ($218,000)
New Monthly Payment at:                       $2,674.78

Program Guidelines:

Must be 60 days late or more on current mortgage payment (non-performing)
Must be upside down on 1st mortgage - 120% LTV or higher
Primary residence and 2nd homes only
Home in BK is Ok – the home would need to be either approved by the Trustee or the BK released prior to closing
Max loan amount $1.5 million (based on current market value)

Program Highlights:

Restructured Mortgage Balance at current Appraisal Value (market value)
New Restructured Mortgage Term: Impounds Mandatory – No “Pre-Payment Penalty”
Currently 8.75% (Wall Street Prime + 5.5% Fixed @ closing) PITI Fully Amortized for 30 Years (Rate Lock is Determined at Time of Purchase of Note Close of Escrow )
Judgments, Liens and Child Support, etc. “May Remain on Title”
NO Minimum FICO Score
Full Income Documentation Only
Max. Debt-to-Income Ratio = 40% (front-end)
Additional forms of income and co-signers accepted
Available Nationwide

Eligible mortgages include:

Subprime
Negative Amortization
Pay Option Arm
Non-Converted Construction
Bank Portfolio Product
2nd Mortgage 100%+ CLTV at Origination
2nd Mortgage HELOC

Non-eligible mortgages include:

FHA Insured
VA Insured
Conventional Fannie Mae or
Freddie Mac
Mortgages Held by Private Parties

Compliance with:

RESPA (Real Estate Settlement Procedure Act)
California SB 94
California DRE Foreclosure Consulting Act

Closing Process:

1) ORIGINATION
Worksheet Completion with Homeowner Pass - Worksheet Submission to CFPG

2) UNDERWRITING
Review and Acceptance into program (Acceptance welcome sent to Homeowner)

Evaluation Process: subject property, note, legal documents, income verification, title

3) INVESTOR OFFER TO PURCHASE
Offer to Financial Institution or Lien Holder for Individual Purchase
Note on Subject Property Placed into Designated Bucket for direct pool purchase from financial institution / lien holder

4) INCOME VERIFICATION
Income Verification from third party CPA firm ordered & confirmed

5) AFFIRMATION, 3-DAY RESCISSION
Affirmation Sent to Homeowner (with new loan amount & terms of the stand-in note)
Homeowner Executes Affirmation (sign, date & notarized) & returned to Investor
Homeowner has a 3-day Right to Cancel: “date starts from the execution of
affirmation*”

*Affirmation is subject to seller or financial institution’s acceptance of price, and execution & delivery of buy-sell agreement, and all legal original docs; assignment of mortgage lien (deed of trust), promissory note assigned, servicing records and settlement signed off and placed into escrow / title.

6) SELLER ACCEPTS OFFER, STAND-IN NOTE DRAWN
Offer Accepted : one off or pool purchase by selling financial institution; “Buy-Sell Agreement to be executed.”
Investors Stand-in NEW Promissory Note drawn and sent to escrow for borrower signing * Doc signing.

7) HOMEOWNER TO ESCROW
Docs are Drawn: Borrower to sign in escrow (Fidelity National Title)
        “Borrower has 3-day Rescission Period”
Cash to Close
        • R.E. TAXES IN ARREARS
        • HOMEOWNER INSURANCE PAID TO DATE
        • HOA DUES IN ARREARS
        • 1 OLD PAYMENT (given to previous lender at
             closing)
        • 15 DAYS “ODD INTEREST”
        • 1ST PAYMENT @ RESTRUCTURED LOAN
              AMOUNT

8) INVESTOR FUNDING - Investor Wires Funds to Escrow
Escrow Disburses Funds upon confirmation of assignment recorded

9) CLOSE OF ESCROW - Transaction Closed

Example:
Modification                         Principal Reduction
Loan Amount $290,000               Loan Amount $158,000
Interest Rate 3%                                          Interest Rate 8.75%
P&I Payment $1,450.00            P&I Payment $1,250.00

Example Overview:
Home Purchased for: $330,000
Current Balance was:    $290,000
Current Market Value:    $158,000
Principal Reduced to:    $158,000
Principal Reduced by: $132,000
Payment Reduced by 30%:    ($600.00)

Program Benefits:

Principal Reduction
Payment Reduction
Home mortgage at Current Market Value
90 Day Closing Time Frame
No Tax Implications
No Prepayment Penalty
Service Clients Nationwide
Reposition your home to gain equity
Your mortgage is now a positive investment
No longer upside down
More affordable payments
Run Principle Reduction program while you're in your loan mod

Cost of Services:
1st Mortgage              $1650 - (Includes Property Appraisal Fee)

2nd Mortgage            $ 595 - (only if with same lender)

The Investment Company:
FH4A has been strategically aligned with a publicly traded company established as a
consumer finance lender and depository with the FDIC in 1960. In 1990 they elected to become a non-depository and primary investor for hard-money loan transactions acting as an asset holding company for its shareholders.

Legal Stuff:
CFPG will review the submission and worksheets prior to acceptance. The investor orders all property Appraisals, BPO’s, AVM’s, Credit Reports & Title Reports; and opens escrow.

CFPG’s investor does not deal with the consumer directly in the origination process of the Principal Reduction program. The investor purchases notes from financial institutions in the secondary market. The investor requires an evaluation, appraisal, and processing fee as part of the preliminary underwriting process for acceptance into the program. $795.00 of the evaluation fee on 1st mortgages is refundable and $595.00 of the evaluation fee on 2nd mortgages is refundable if a consumer submission through wholesale origination does not meet acceptance of the investor's guidelines.

Upon acceptance from the investor and issuance of a client identification number the evaluation, appraisal, and processing fee becomes Non-Refundable.

Work performed for acceptance includes, but is not limited to non-affiliated third party vendor’s charges and internal underwriting expenses in evaluating the purchase of the note.

Call Chris at 970-242-2600 to calculate your eligibility and for more details.

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