What is a Loan Modification?
A loan modification is the altering of one or more of the characteristics of a loan and/or its terms due to the inability to make payments in the agreed upon time-frame or because the property is worth less than the homeowner owes. This means that a homeowner has taken out a loan to purchase a property and is not able to repay it in accordance to the pre-set schedule designed when the loan was taken out. They then fall behind on their payments and are faced with a few very tough choices.
The only option that does not force the homeowner from their home is the loan modification. For homeowners who can document the ability to repay the loan in a reasonable and sustained capacity, the bank will allow certain changes to be made. These changes include temporary interest rate reduction, permanent interest rate reduction, adding an interest only option, stretching of amortization (40 or 50 yrs), principal balance reduction, a forbearance agreement or a combination of changes.
The idea behind a loan modification is to design the amount of payment to a level where the homeowner can consistently make his mortgage payment as well as pay his other bills. Banks do not want a mortgage to consume an entire monthly budget. They will take the homeowners entire budget into consideration i.e. car payment, cell phone, utilities, credit card payments. Keep in mind that the bank’s loss mitigation department will take into account all necessary expenses to live a normal life while still maintaining a reasonable mortgage payment.
Many individuals need to know their options. Before you even discuss accepting a foreclosure or a short sale you will want to investigate eligibility for a loan modification. If you need sound advice, contact www.krisdewitt.com
How to Decide whether to Refinance or Modify
Whether a homeowner will be able to refinance (see: www.krisdewitt.com) or modify their loan depends on each individual situation. Most homeowners interested in mortgage options in this market are the ones who are in trouble and therefore do not qualify for a refinance. If you are behind on your mortgage, always attempt a modification first. When a homeowner is late but can show the ability to pay a lower payment, the benefits from a modification will greatly outweigh that of a refinance. The interest rate on such a modification will generally be lower than that of an on-time homeowner with good credit who pays to refinance.
When a borrower is upside down there is no option but to modify. Contact an attorney based/law office modification company and have they fight for you. Most modification companies charge a small flat fee that is non-refundable. Isn’t knocking tens of thousands of dollars off of your principal balance seems to be worth the risk?
Whether a homeowner will be able to refinance (see: www.krisdewitt.com) or modify their loan depends on each individual situation. Most homeowners interested in mortgage options in this market are the ones who are in trouble and therefore do not qualify for a refinance. If you are behind on your mortgage, always attempt a modification first. When a homeowner is late but can show the ability to pay a lower payment, the benefits from a modification will greatly outweigh that of a refinance. The interest rate on such a modification will generally be lower than that of an on-time homeowner with good credit who pays to refinance.
When a borrower is upside down there is no option but to modify. Contact an attorney based/law office modification company and have they fight for you. Most modification companies charge a small flat fee that is non-refundable. Isn’t knocking tens of thousands of dollars off of your principal balance seems to be worth the risk?
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February 19, 2009 7:34 pm | 
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