2% Interest Only 5-year loans available again?!? Yes, but beware.

-Home Owners and Mortgage professionals, this one is for you.

I am a big advocate of mortgage modifications that include a fully documented re-underwrite and re-qualification of every borrower in America allowing a maximum of 28/36 debt to income ratios with market-rate 30-year fixed mortgages.

Yesterday, the video camera was calling my name so I decided to go into more color on mortgage modifications.  Pass this video around to friends and family. Take matters into your own hands because it is obvious nobody will be riding to the rescue anytime soon.

That being said, I do believe a large scale home owner bailout will come, but it will likely involve giving up present and future equity in your home.  Right now you do not need to do that.  You can even negotiate into the modification a better reporting of this event to the credit reporting agencies with some banks.

In recent weeks I have seen banks get very aggressive including reducing principal balances to lower than the present home values and giving borrowers 2% interest only loans for five years.  Wachovia offered to buy down a friends mortgage to 2% on a 30-year fixed, however, they had to refi through FHA and carry a silent second for the principal balance reduction needed to get them to the FHA limit for the area.  This sounds great but I do not advocate a super low interest only rate without a principal balance reduction. Getting 2% today with no principal reduction just kicks the can down the road and will cause major troubles then.  Without a principal reduction you are still stuck unable to move or refi.

I truly believe that there is a small window in time that exists right now where banks can’t handle any more foreclosures and you hold all the cards. The last thing the bank wants is another foreclosure and 65% write down.  If you play your cards right you can win and the bank can have a long-term customer paying her mortgage payment each and every month who will some day own the home. That is what it is all about.

I also went into great detail on mortgage modifications on July 4th and I urge you re-read the posts. There is information in here you must know BEFORE taking on this task. You have to know what to ask for because banks are a ‘for profit’ business, which means decisions are not going to be in your best interest. – Best, Mr Mortgage