Loan Modification Frequently Asked Questions
Will lawyers that perform loan modifications also be held to these proposed rules, or more specifically, are all lawyers good and otherwise exempt?
Lawyers that understand the securitization issues and the use of bankruptcy in the modification process are eminently more qualified to handle cases for borrowers than anyone else as the have to answer to bar associations. Borrowers that try to do it themselves will be slaughtered by the banks. The banks have now resorted to deception(Indymac is sending out a deceptive notice to borrowers that they have been approved for modification in order to squeeze out one more payment from borrowers in foreclosure). Also many of the banks are hiding behind their so called investors in order to deny Obama programs.
What is a Loan Modification?
A loan modification is a permanent change to a loan contract agreed upon by the lender and the borrower. The most common modifications are lowering the interest rate, reducing the principal balance, fixing adjustable interest rates, increasing the loan term, forgiveness of payment defaults and fees, or any combination of these. A loan modification can occur when a homeowner is experiencing a documentable hardship such as job loss or loss of income. Through strategic negotiation a loan can be modified to a payment you are willing and able to afford.
How do I qualify for a loan modification?
To qualify for a loan modification, the property owner must have steady income and at least one of the following:
- Currently behind on your mortgage or close to it
- Proof of financial condition and your ability to make payments under the new loan structure
- Short term financial difficulty
- Little or no equity in our home
- Pre-hardship record of good payment history
- Currently in an Adjustable Rate Mortgage ready to reset
- Currently in a high interest rate fixed mortgage
What are the advantages of restructuring my loan?
- No new appraisal (most cases)
- Minimal credit check or minimum FICO score (many cases)
- No origination fees, refinancing or closing costs
- Cures your past due status
- Protects your credit rating
- One time flat fee for services
- Protects your equity in the home (if applicable)
What are the advantages of an attorney-Performed Debt Resolution?
- Comprehensive knowledge of the legal system.
- Knowledge of consumer protection laws.
- Experienced in handling financial negotiations.
- Uses a systematic approach.
- Leverage HUD approved best practices.
- Support team ensures timely follow up and document production.
- Objective view of the situation.
- Banks tend to respond better when they hear the word "attorney".
How is a Loan Modification Negotiated?
Most successful loan modifications are negotiated through attorneys with assistance from paralegals, case managers, intake auditors, and a host of real estate and financial professionals. During negotiation, an attorney presents the case that the loan should be restructured to ensure that the mortgage will continue to be paid.
Can a property owner negotiate his or her own loan modifications?
Yes. Homeowners can negotiate their own loan modification. However, most property owners do not have the expertise, time and tools to effectively negotiate a beneficial loan modification. But if you were being sued by your bank, would you represent yourself in a court of law?
What makes a loan modification proposal acceptable to the lenders?
For a loan modification to be acceptable to lenders, the property owner needs to demonstrate the ability to pay and the willingness to pay in the form of the following:
- Evidence of a hardship showing an inability to make mortgage payments at the current rate.
- Evidence that the homeowner can continue paying if mortgage payments are reduced.
What qualifies as a hardship?
Have you experienced and unavoidable increase in expenses? How about loss of income? You will need to demonstrate that a hardship makes it difficult for you to meet your current monthly mortgage payments. A hardship can be defined as a recent increase in your interest rate, divorce or separation, death of a spouse, loss or reduction of income, illness, military service, and job relocation.
After July 1, 1991 but before January 1, 2001, the 7-year unearned premium refund schedule shown in Mortgagee Letter 1994-1 remains in effect.
Will a loan modification help me avoid foreclosure?
Yes, a successful loan modification can help you avoid foreclosure. The goal of a loan modification is to change the terms of the loan and bring the loan current to ensure foreclosure is avoided.
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