Loan Modification
A Loan Modification is a change in the contractual terms of a mortgage, which is normally the interest rate and/or term. A lender may also lower principal balance of the mortgage to help the repayment of the loan. Loan Modifications have different underwriting criterias than a normal mortgage refinance. Late payments on a mortgage maybe a plus for a loan modification, but it can hurt you if you were trying to do a regular refinance.
Most loan modification companies offer a mortgage audit or forensic review of your current loan documents. They will help find errors in the documents to build a case to help negotiate your loan modification. If your current mortgage company is facing litigation, then they may more than likely modify your loan to avoid litigation. A loan modification company who work with attorneys will help review these documents, to help build your case against your current mortgage company. It’s very important to gather all of your loan documents to have it accessible to the attorney.
Loan modifications can be done with a 1st and 2nd mortgage. They may offer a principal reduction but it is uncommon for this to happen. Most lenders can however offer rates as low as 2%, and may take off a few years from your mortgage term. A borrower must be able to qualify for the new loan modification mortgage terms.
A large number of borrowers are being turned down by their mortgage companies. Most companies will disregard a consumer when acting alone, but when an attorney gets involved the negotiating atmosphere does change. It’s important to find the right loan modification company that will fight and negotiate new mortgage terms that can help you stay in your home. Most lenders are unwilling to offer a borrower who is currently paying 7% rate a new rate of 2%. They would much rather have the borrower pay the higher rate to generate more profits. Not all borrowers can obtain 2%, and not all lenders will offer a 2% rate. Loan Modifications are based on a case by case scenario, and will also depend on the expertise of the attorney and loan modification company. Loan Modifications are not a new concept and have been around for a while now. They are also referred to as a Loan Workout.
Make sure to gather these documents to being your Loan Workout:
1. Last months of paystubs for all borrowers.
2. Gather all evidence that will be used to negotiate. Many have fallen behind on their mortgage due to medical illnesses, layoffs, ARM readjustments, and more. It’s important to gather theses documents to present to the loan workout company.
3. All hardship information will be necessary. Missed utility bills, Auto payments, child support, alimony, etc are all used to help negotiate your new terms.
Make sure to save up as much money as possible. The loan workout company and/or attorney will charge a fee to help you negotiate your loan modification, and the lender may ask that you pay the delinquent balance on the mortgage. This will also be negotiated, but the lender may ask you to pay up to 100% of the delinquency balance.
It’s very important to have an attorney review your documents even if the lender has already sent you the loan modification documents to sign.