What is a Loan Modification? A loan modification is a permanent change to one or more of the terms of an existing loan. The purpose of a modification is to change the terms of your loan in a positive way to significantly lower and stabilize your monthly payment, stop your loan balance from increasing and prevent any future changes to the terms of your loan which may lead to future delinquencies.
Who Qualifies for Loan Modification? As a result of today's housing conditions, lenders and investors are encouraged to work with borrowers who are experiencing hardship. An adjustable rate mortgage, high interest rate, decrease in income and/or owing more than the value of your home are hardships which may qualify you for a loan modification.
Why will it work for me? The government has asked for ALL mortgage lenders to extend help in the foreclosure epidemic by modifying mortgages for homeowners who are experiencing hardship. Presenting the lender with a complete modification package reviewed by a modification consultant will be beneficial to you and ensure that you will receive the most aggressive modification. Certain websites can automatically produce your Bank Approved Loan Modification Package.
What if my credit is bad? A Loan Modification is not based on credit. By modifying your loan to an affordable payment you will be able to repair damaged credit by avoiding future delinquiencies and what could have been an inevitable foreclosure.
What if I have no equity or I am upside on my home? It does not matter! Some lenders are allowing principal reduction, which means that your loan amount may be reduced to the actual market value of your home today. This is a common solution for some cases which have an extremely high percentage of negative equity.
What if my income is too low? You must show the bank that you will be able to support the modified payment. Income that may be considered includes yourself and all others in your household; even those who are not borrowers on the loan. A modification consultant will be able to analyze your case for modification concerning income and provide alternative options for subsidizing your income if it is necessary.
What should I expect the terms to be on my new loan? Banks have rapidly changing guidelines for Loan Modifications. A bank will typically modify your loan into a loan you can afford and continue to pay. This may include a lower interest rate, payment reschedule, principal reduction, longer terms or any other function that will make and keep the loan performing.
How much can I really save by doing a loan modification? A loan modification could save you hundreds or thousands a month. Remember, a mortgage loan is typically amortized for 30 years. This means that the same loan modification that saves you $500 a month really equals $150,000 over the life of the loan.
Does every bank do loan modifications? Yes. We are in a housing crisis and banks are willing to work with clients to help save their homes. Approval is all about preperation and presentation. Retaining the services of a professional will ensure you receive the proper counseling and most aggressive results in a timely matter.
How does the bail out bill affect my chances of modification? This bill offers staffing through a non-profit governemnt organization who offer financial counseling and the bill provides stimulation to the economy by encouraging new buyers to enter the housing market. This will help to stabilize market values through new home purchases and short sales. By stopping the home prices from falling you will be able to start recovering your equity.
What should I do to ensure the best loan modification? Take advantage of attorney services that fully process your modification. Be sure to choose your representation wisely by researching the type of law practiced by your attorney. A real estate attorney would be the most knowledgeable and experienced to represent you. In addition to knowledge, your attorney’s record with the bar association is a good indicator of his integrity which translates into quality and work ethic.
How long does the process take? A package prepared properly will expedite the process. Each lender is different and can take 30-90 days for a decision. There are many factors which affect the process including the number of applicants requesting modification, staffing in loss mitigation and also which private investors are involved. It is not uncommon for one loss mitigator to have up to 700 files under their management at any given time.
Can I do my loan modification myself ? A loan modification firm will charge you a high fee ($2000-$5000) to submit the docs that you can submit yourself. Banks are willing to help their clients with a loan modification without an attorney. What is important, is you have the CORRECT, BANK APPROVED documents ready for submission, so the bank can efficiently and more effectively review your case.
Are there any other costs involved? There are no costs involved with a loan modification when applying on your own. The banks are modifying loans for no charge.