Loan Modification

Are you facing any of these challenging issues?

• Owe more than current Market value?
• Adjustable Rate going up?
• Loss of income or job?
• Late payments?
• Notice of default?
• Pending foreclosure?
• Negative Amortization loan?
• Current on your mortgage but struggling to make ends meet?
• Considering a short sale negotiation?

Don’t settle for what most lenders are offering. If not prepared by a specialist, most consumer modifications are just temporary fixes. Let our experienced specialists negotiate on your behalf and keep lenders at bay. You don’t have to be past due on your payments to modify your loan! Call us today for a FREE CONSULTATION.

Want to learn more about loan modifications? Read on.

What is a “loan modification”?

A loan modification is a change that is agreed to by both parties (the lender and the homeowner) to the loan contract. The lender agrees to modify the existing loan to help a homeowner who is facing hardship by making the loan more affordable. The modification is usually in the form of a rate reduction or a rate freeze (fixing the rate for a certain time). It may also be a change in the term of the loan to make it extend for more months, resulting in a reduction of monthly payments. In some instances, a loan modification can be a reduction in the principal amount.

Is this a new program?

No. Modifications are made by lenders when a borrower is delinquent in payments and has suffered a hardship, such as a job loss, divorce, illness, disability, etc. It is now possible to secure a modification or freeze when rate adjustments on an adjustable rate mortgage make payments unaffordable for the borrower.

Who is eligible?

A homeowner may be eligible for a loan modification if the homeowner is facing financial hardship AND otherwise he/she can afford a modified payment, but not the current mortgage payment. Hardships that are taken into account include lost job, reduced income, illness, inability to sell, death, divorce, military duty, job relocation, failed business or incarceration.

Will my lender respond favorably to a request for modification?

Lenders would rather not foreclose on your house because of the expense of doing so. As part of the loan modification process, your previous loan package will be reviewed for possible errors and violations of state or federal laws and regulations governing mortgages. If errors are found, your lender is more like to agree to a modification. Otherwise, you might be entitled to sue your lender. Even without errors, lenders are still likely to work with you rather than foreclose on your property. Foreclosure involves significant labor and legal costs.

How long will it take?

On average, a loan modification takes about 45 to 90 days if the lender is willing to negotiate. It could take a longer time, if the lender is not inclined to make the modification. As part of the process, it is necessary to do a thorough examination of your loan documents to determine whether they are in compliance with state and federal law.

How long do I have to think about it?

If your payments are too high, or will become too high when the rate is adjusted, you need to act now because lenders are currently inclined to modify loans so as to avoid foreclosures. In addition, government incentives are being offered to lenders in an effort to encourage modifications. It is important to act quickly because the qualifying rules are changing daily. Lenders are also more willing to negotiate with homeowners before they fall too far delinquent. You should seek counsel immediately to be certain that you won’t lose your house.

Can a foreclosure be stopped?

If a sale date has been set for foreclosure on your property, it is still possible to get a delay and review your situation. That review could stop the foreclosure if renegotiation or modification is available. However, you must act fast.

What about bankruptcy?

If you have filed bankruptcy, you will not be able to negotiate any loan mitigation programs with your lender until the mortgage is discharged or dismissed from the bankruptcy proceedings. However, the original loan should be reviewed for compliance during this time. If you have not filed, then your loan documents should be reviewed for compliance issues. Bankruptcy filing should be your last resort.

What about the cost of the modification?

There are costs associated with a loan modification. Property taxes must be current or you must be paying on a plan approved by the taxing authority. All additional lien holders must agree to be subordinate to the renegotiated loan. You may need to pay delinquent fees on payments not made.

What other options are available?

Short sale: This is a sale of property in which your lender agrees to discount the loan balance due because of economic hardship. The house is sold for less than the outstanding loan balance, and the sale proceeds are given to the lender in full satisfaction of the debt. The advantage of a short sale is that there is no report of a foreclosure on the borrower’s credit history. However, there are tax disadvantages to this type of sale. It is not recommended unless a loan modification cannot be obtained or it is determined that the homeowner cannot afford the home.
Deed in Lieu of Foreclosure: This procedure involves the borrower transferring the deed to the property to the lender to satisfy the loan and avoid foreclosure proceedings. This procedure requires voluntary, good faith action by both parties and is rarely acceptable to lenders.
Short Refinance: A lender may agree to accommodate you on a “short refinance” if you have suffered a long-term financial hardship and cannot maintain your loan. This option could have adverse tax consequences as well. You will be required to obtain alternate financing to pay your current lender off in full.
Repayment Plan: If your financial hardship is short-term and your loan is two or more months past due, it may be possible to ask your lender for a payment plan. You must be able to show that you can afford the plan.
Refunding of VA Loan: For a VA loan, it is possible that the VA will buy your loan from the lender. If refunding is approved, the VA will refund the loan after it is purchased, and the delinquency will be added to the principal balance. The loan is then re-amortized.
FHA Loans: There are also some special programs offered for borrowers in FHA loans. If you have an FHA loan, your loan mitigation representative will be able to review these options with you.