Here are the Top 10 Most Frequently Asked Questions For Modifying A Loan:
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What exactly is a loan modification?
A loan modification is a permanent change in one or more terms of a borrower’s home loan, allows the loan to be reinstated, and results in a payment the homeowner can afford. Many loan modifications involve fixing or lowering interest rates through negotiation between an attorney (loss mitigation specialist) and the loan lender (banks).
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Is the lender allowed to include late charges in the Loan Modification?
The current federal plan mandates that the bank waive any penalties, late fees or administrative charges when offering a loan workout or modification.
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Do these new government programs help when it comes to getting my loan modified?
$75 billion has been recently allocated by the Federal government to subsidize lenders and servicers who are offering loan workouts to their clients. This means that the banks now have a monetary incentive to help qualified borrowers with their loan modifications and ammendments. Also th e homeowners who continue to pay their modified loan installments on time will be eligible for a $5000 credit to their current loan balance.
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How do I qualify for a loan modification?
The most important criteria your lender is looking for is your ability to make the new modified loan payments on time now and in the future. You need to be able to show your lender proof of income, as well as a complete and accurate financial statement which details your income and expenses to prove to them that if granted the loan workout, you will unquestionably be able to afford the new, lower payment plan. You also need to demonstrate and prove that you are facing a financial hardship. This can include lower income, loss of job, work injury, pregnancy or higher expenses for example.
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Do I have to wait until my payments are delinquent before I’m eligible for a loan mod?
The new Home Affordable Modification Plan passed by President Obama actually has a special incentive to pay lenders an extra bonus for allowing at risk but not yet delinquent borrowers to modify their loan terms. This was passed in order to help homeowners in trouble to readjust their loans before they default on them.
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What is are the acceptable hardships to qualify for a modification?
Every borrower has a different reason and set of circumstances that forced them to fall behind on their loan payments, but most banks generally consider military service, loss of income, serious illness, death of a family member, spouse, or co-borrower, divorce/separation, and job relocation to be acceptable reasons to allow loan mods. Its extremely important for the borrower to attach a detailed and compelling hardship letter along with the loan modification application in order to get the best results.
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Can I avoid foreclosure if I get a loan modification?
Absolutely!! This is the main goal for everyone involved. By working with your lender, you will be able to negotiate new terms to your loan which will bring it current and you will be able to stop the foreclosure process as long as payments stay up to date!
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Will my new loan modification include the balance from missed payments?
Yes! Arrears will be added back into your new loan balance and spread out over the new term payments. By doing this your loan will be brought back to current and you will avoid foreclosure.
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Should I negotiate my loan modification with the bank personally or should I pay someone to represent me?
This is your choice, and it really is up to your personal preference. If you feel comfortable negotiating the new terms yourself then you should do that, however it never hurts to at least get a free consultation from a loss mitigation specialist. The US Treasury Department has been strongly urging borrowers to avoid paying third party companies to represent them in the loan modification process, however some companies out there have proven to be very helpful for borrowers who had little financial knowledge or negotiating skills. That is entirely up to you and your comfort level with dealing with your lender. No matter what you decide on, you should start learning the process in and out. This means research everything you can about your legal rights and what its going to take to get your application approved by your lender. It will be much harder for a lender to take advantage of a knowledgeable borrower and you will have a much greater chance of getting the modifications you are looking for.
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Where do I start to get my loan modified?
Before contacting your bank’s loss mitigation department or a loan mod company, do your homework-learn as much as you can about the loan modification process so you can make informed decisions.
