March 18, 2010

Top 10 Questions about Loan Mods

Posted in Loan Modification tagged at 5:58 pm by demetriagraves

Let’s face it; times are tough for everyone these days. On the top of the list are homeowners struggling with their mortgage payments as well as other financial hardships. The loan modification process can be frustrating and confusing for many distressed homeowners. This is why having expert advice is so important, plus many of my clients have asked me to provide some basic information up front. To help you understand how the process works and what to expect, here are the Top 10 Questions I get asked about Loan Mods and some simple answers:

1. What exactly is a loan modification?

A loan modification is a permanent change in one or more terms of a borrower’s home loan, allowing the loan to be reinstated, and resulting in a lower payment the homeowner can afford.

2. Can the lender include late charges in the Loan Modification?

According to HUD (US Department of Housing and Urban Development), the accrued late charges should be waived by the lender at the time of the loan workout. This varies depending on the type of loan, but it’s wise to always request a complete breakdown and description of all fees and penalties from the lender.

3. Can the bank require an interior inspection of the property if they have concerns about its condition?

Yes, the lender may conduct any review it deems necessary to verify that the property does not have physical conditions which might adversely impact the value.

4. How do I know if I will qualify for a loan modification?

The main criterion your lender is looking at is your ability to make the new modified payment now and in the future. The lender needs proof of your income and a complete and accurate financial statement detailing your income and expenses, to show them that, if granted the modification, you will be able to afford the new, lower payment.

5. Do I have to be currently delinquent on my payments to get a loan modification?

Most lenders are now accepting applications from homeowners who are not currently delinquent, but who are able to prove to their bank that due to imminent interest rate increases or other factors, they will no longer be able to afford the loan payment under the terms of their loan. It is advisable to contact your lender as soon as possible to start the loan modification process, whether you are delinquent or not.

6. What is an acceptable Hardship situation?

Each homeowner has a unique set of circumstances that caused them to fall behind on their home loan, but generally the lenders consider divorce/separation, loss of income, death of spouse, co-borrower or family member issues, illness, job relocation, or military service to be acceptable reasons to consider a loan modification. A compelling hardship letter is a very important part of a successful application.

7. Will a loan modification help me stop foreclosure?

Yes, that is the goal. By working with your lender to find a loan workout solution, your loan is brought up-to-date and the foreclosure process is halted.

8. Can my missed payments be added back into my new loan modification?

Yes, the missed payments can be added to the new loan balance and spread out over the term to allow the loan to be brought up-to-date.

9. What are the advantages of having an attorney represent me?

An experienced attorney knows your legal rights and is experienced in dealing with many lenders. A good attorney knows what it takes to get your application approved. Do you really want to risk losing your home by not getting the right legal advice? Beware of loan modification companies that require a substantial up front fee, as unfortunately there are many scams to do with loan modification.

10. So how do I get started to modify my loan?

Before contacting your bank’s loss mitigation department or a loan modification company, I’d recommend that you contact me for a fee initial consultation. So you can learn as much as you can about the loan modification process, and you can make informed decisions. There is a lot of information online about loan modifications, but it can be difficult to get all the information you need in an easy to understand format. I’m here to answer all your questions and give you as much support as you need.

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