The Loan Modification

Definition of loan modification:

It is defined as a permanent change to one or more of the terms of an existing loan. The purpose of a loan 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.

Eligible Borrower:

• The 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.

• 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.

• 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.
• 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. 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.

A loan modification could save you hundreds or thousands a month. Because 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. It is a big amount. 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.

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. 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 that affect to 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. 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. You do not have to pay any expense for a loan modification when applying on your own. The banks are modifying loans for no charge.

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