Ways Your Loan Can Be Modified

What terms a lender will agree to largely depends on your ability to pay and what would make the most economical sense for both parties.

• Adding the delinquent balance to the loan. Rather than require payment up front, the lender may choose to add the balance owed to the new loan terms ensuring you will eventually pay it back.
• Reduce the interest rate. You’ll need to prove that a rate reduction can positively affect your situation and allow you to resume making timely payments.
• Extending the years due. By adding years to the loan, the lender is able to reduce the monthly payment knowing that they will recover the amount later on.
• Reduce the balance owed. Under some circumstances, the lender may elect to reduce the balance of the loan. To do so, they’ll want to be absolutely sure you will be able to make the new payments.

If you’ve recently experienced a change in your level of income, or a higher interest rate has kicked in on your mortgage payment, there is help. Foreclosure does not have to be a part of your future.

Don’t make the mistake of waiting. There are many more options available to those who act quickly when trouble arises. Face your fears and educate yourself about the two big questions you must face:

What kind of options are available to you and who can you trust to guide you in the right direction?

Let’s look at the second question first. The best way to receive the help you need is by working with a loan modification professional. There are countless stories of individuals trying to “do-it-themselves” by contacting  government programs, filling out endless paperwork and making absolutely no progress in the end. Still others have paid unscrupulous mortgage brokers large up-front fees based on false promises and end up losing everything. Because of the recent changes in the economy, self-proclaimed mortgage experts have cropped up on every corner, much to the dismay of many trusting individuals who did not receive the help that they deserved.

Red Flags

When looking for help with mortgage problems, beware of anyone who asks for up-front fees to help you stay in your home. Real help should include a careful assessment of your personal financial situation, discussing the options that are available to you, and efficient, timely representation between you and your lender.

This can only be accomplished by legal professionals who specialize in the mortgage and real estate industry. Be careful of anyone who is new to the industry and is not a legal professional.

What are the Options?

Now that you’ve learned how to spot the scammers, you still need to know if there are actually options that can help you stay in your home. At the present time there are numerous options available to homeowners who are experiencing a financial hardship. The sooner you contact a loan mitigation specialist and discuss your situation, the better off you will be.

Contrary to popular belief, most lenders would rather keep you in your home than go through the additional paperwork, time, and expense of the foreclosure and resale process. That is why acting early is so valuable.

You may qualify for any of the following solutions:

• Reduced or deferred monthly payments
• Debt forgiveness
• An extension on the length of your home loan
• A lower interest rate
• The conversion of an adjustable rate (ARM) loan to a fixed rate
• Or a combination of any of the above modifications

With each of these options, there are pros and cons, paperwork, legalities, and a negotiation process. If you deal directly with your lender yourself, you may not be made aware of all of the options that are available to you. The reason for this is simply because your lender is looking out for their best interests. That is why a representative, who is familiar with all of the modification guidelines and options is such an asset to you.

Don’t wait another day. If you are having trouble making your mortgage payment, a loan modification can be just the answer you were looking for.

However, they, like other lenders, have been increasing their output as more effort is made to increase system efficiency.

Recently, we saw a great result from Bank of America under the government program.

This particular homeowner had a fairly typical experience with for those that obtain a loan modification. Her offer came within just under four months. While this may seem like a long time, it’s probably a little faster than most.

Her patience was recently rewarded with a significant monthly savings. With an original payment of $2,700 and an interest rate at 8.99%, there was some fear of not being able to keep up even though she had not yet missed a payment.

As of this morning, she is now saving $804.57 per month on her new payment of $1,539.98. Like all Making Home Affordable modifications, she will have to make that payment for three months on a trial basis before the modification will become permanent.

We’re very happy for her and her family and hopeful that this significant savings gives them the right amount of financial relief in these turbulent times.

Some great results have been seen with GMAC and the Making Home Affordable plan and at a quicker pace than with many other lenders.

We recently highlighted three cases on our GMAC loan modification profile page. The longest of them took three months. If that seems like a lot, you haven’t seen the results of other lenders. One recent mod was approved after 12 months and multiple rejections. Hard work from your mitigation team and patience is a requirement with most lenders, but GMAC’s performance has been impressive.

The three highlighted cases, which you can read about by clicking the link above, saved clients an average of $679.96 per month on their monthly mortgage payment. The reductions ranged from 17% to 36% of the previous total mortgage payment.

The results are ultimately based on a number of factors pertaining to your personal situation. A result cannot be guaranteed, but a reasonable idea of success can be determined through the qualification process.

The modification took over 8 months to achieve but the results are stunning. Not only did he keep his home while we were working the case, we secured him a new monthly payment of $1,300.72. That’s a savings of $964.28. He only has to pay one month’s mortgage payment to the lender to get reinstated and the rest of the $27,200 owed to the lender has been brought current and placed at the end of the loan.

We tell clients all the time, be patient. It’s not easy getting a loan modification and lenders are tough to work with. This is a perfect example of what can be achieved with hard work and patience.

Loan modification can mean everything to a homeowner no matter what your mortgage payment is. Two recent success stories show this.

• A homeowner with Bayview Loan Servicing started with a  $4,511.16 monthly mortgage payment. This person could not sustain the payments if they couldn’t be adjusted. By utilizing the Making Home Affordable plan, this client’s payment was reduced to $2,313.55. That is an astronomical savings of $2,195.61 per month. Needless to say, that’s an incredibly satisfactory result.
• Another homeowner began working on their $913.61 monthly payment with NationStar Mortgage. After the negotiating company’s work was complete, the result was a 30 year fixed loan at 5.5% for the client with a payment reduction to $672.29 per month. They are saving $241.32 every month now. This new payment is nearly a 30% reduction and even though it’s much smaller, represents the difference between home affordability and foreclosure.

Generally, any of the following modifications are made: adjusting the loan’s interest rate, adding the delinquent balance to the loan, extending the years due or reducing the balance owed. Through one or any combination of these, the lender and borrower are able to agree on terms reassuring to the former and agreeable to the latter.

Loan modification is especially important nowadays as many homeowners are stuck with bad mortgages. In fact, the proliferation of bad housing loans is purportedly what triggered the current global financial crisis. As such, professional loan modification specialists are offering their services to homeowners to re-negotiate their loans with lenders.