| A loan modification is a long range answer to a | | | | obligations in addition to your mortgage payment, in |
| financially stricken borrower that might otherwise | | | | order for the bank to determine if you will qualify for |
| never be able to afford to remain in his home. A lender | | | | the new loan payment. |
| may be approached to consider a loan modification | | | | A loan modification is evaluated with these factors in |
| before a borrower falls behind on even one payment. | | | | mind so that the new modified loan is more affordable |
| A homeowner can be late on payments, seriously in | | | | to the borrower. Your monthly budget is seriously |
| default on his loan, in bankruptcy, or even in the early | | | | taken into consideration when determining the structure |
| stages of foreclosure proceedings to be considered | | | | of the new loan. Several options are available to the |
| for a modification of his loan. | | | | lender. |
| If unforeseen circumstances have placed your monthly | | | | 1. A lump sum (the total of all arrears & fees) can be |
| mortgage payment in jeopardy, and you see no | | | | added to the rear of the existing loan and a new |
| financial relief in the near future, immediately contact | | | | monthly payment calculated based on this new loan |
| your lender and explain your recent change in financial | | | | amount. |
| status. Depending on the current relationship between | | | | 2. The term of the loan can be extended- lengthened- |
| you and your lender (meaning whether you are up to | | | | to lower the monthly obligation (remember, the longer |
| date with your payments or have received a notice of | | | | the loan term, the more you pay for the home in the |
| foreclosure or anywhere in between), a loan | | | | long run, but at least you can remain in your home). |
| modification may be the most advantageous approach | | | | 3. The interest rate can be lowered and thereby lower |
| to the problem for both you and your lender. | | | | the monthly payment. |
| The modification of an existing loan is the complete | | | | 4. An adjustable rate mortgage can be changed to a |
| restructuring of the old loan into a new loan with | | | | fixed rate - ensuring the borrower of a fixed, |
| moderately to drastically different terms. These new | | | | affordable monthly payment with no surprises. |
| terms are based on many factors. The condition of | | | | 5. A percentage of the borrower's income could be |
| your current loan is a big one. Exactly how serious is | | | | used as a cap for the monthly mortgage payment. |
| the default level of your loan? As you can imagine, the | | | | 6. A completely new type of loan product could be |
| more current you are, the better your prospects for a | | | | offered that may differ from the above mentioned |
| favorable and more reasonable offer from the lender. | | | | loans or may be any combination of them. |
| What kind of hardship have you sustained - is it simply | | | | There is frequently an additional loan modification fee |
| poor planning on your part, buying more house than | | | | that is charged up front and collected separately for |
| you could truly afford, children's college expenses | | | | the new loan. Be sure to ask questions and know |
| higher than anticipated, loss of a job, loss of a spouse, | | | | exactly what you are agreeing to with your new |
| or serious medical condition, etc? This is another | | | | modified loan. |
| determining factor in the bank's consideration of your | | | | Remember it is always cheaper in the long run for the |
| request for a loan modification. What is your income | | | | lender to work with you on making your home loan |
| now and how reliable is it? Do you work on | | | | affordable to you. It is extremely expensive and very |
| commission, are you self employed, are you in a stable | | | | time consuming for a lender to take a home through |
| work field? | | | | the entire foreclosure process. They would truly prefer |
| All these income questions will be considered as part | | | | not to, but if forced, they certainly will! A loan |
| of your request. Your overall credit worthiness will also | | | | modification is the most advantageous solution for you |
| be reviewed. Just like filling out your original mortgage | | | | to remain in your home and for the bank to save lots |
| application, you will be required to list all monthly | | | | of time, money, and legal headaches. |