Loan Modification

Loan Modification:

This is what most people say they want for their home. The goal is of course to stay in your home and get new loan terms that make financial sense. What constitutes a good loan mod can be subjective. Someone may be thrilled with their new terms because it lowers their payment $700 for 5 years, even though they are still $300,000 upside down on the home and thus poised to pay an extra $3 million over 30 years compared to current market prices. Other people will focus primarily on the financial aspect of their home, and unless the lender is willing to forgive a meaningful amount of principal, they will want to entertain other options.

Will your lender offer you one? The mistake many people make is believing that because their neighbor who has a loan with “Chase” got one, they should too because they have a loan with Chase. Please understand, Chase, Wells Fargo, Bank of America, etc. are often just the servicers of your loan.  Each one of these banks lend money from well over a hundred different investors. Which investor do you have? Do they offer loan modifications? If they do, will they forgive principle? How much? What is the lowest rate they offer? Will they fix the rate for 30 years? Or only 1 to 3 years? Until you get assigned a loss mitigator, you may not be able to find out.

Generally speaking, who gets a loan modification?

You must have a genuine hardship. This can be a change in employment, a rate increase, a medical issue, or other situation which makes it difficult for you to make your monthly payment. Please keep in mind, you can be “upside down” on your home and be grossly over-paying relative to the current market value of the home, but if your income shows that you can still easily afford the payment the banks are unlikely to work with you.

You must be able to afford the terms of a new modification. You must be able to stay current with the terms and payments of the new modified loan. As you can imagine, in this economy, many people cannot begin to afford their mortgage. Even if the lender lowered their rate to 2% or lower, their debt-to-income ratio would still be well over 50%. Thus, it makes NO sense for the lender to waste their time offering them a loan mod. You must be able to afford something reasonable.

If you are not sure if you truly are a candidate, when you are not risking money to try, we typically encourage people to at least investigate what types of terms their investor is offering. Being told “no” is better than never trying, and never knowing what you could have gotten!

Short Sale

Short Refinance