A loan modification is the most preferable solution to financial hardship for homeowners looking for mortgage relief, and as such has been the focus of a large amount of media attention in lieu of the onset of the financial crisis.
Most presumably, you are here owing to that fact you in fact have learned of Mortgage Loan Modifications, the potential they possess to help approximately everybody, regardless if you are behind or current on your mortgage loan, and your probably curious for further facts on Home Loan Modifications and loss mitigation practice.
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My object through this write-up is to help you become a Mortgage Modification guru, so read on!
We're going to explore the guiding principals first:
What is a Mortgage Modification?
A Mortgage Loan Modification is a permanent alteration in the stipulations of your existing loan as negotiated by you, the house owner and your mortgage holder.
Why on earth do I need a Loan Modification?
A Mortgage Modification can do a myriad of great things for you. Primarily, optimal Home Loan Modifications lower interest rates, and of course, lower payments. There are mortgagees all around the country saving hundreds of dollars every month because of Home Loan Modifications.
Additional advantages of a Mortgage Modification include the prospect of a abatement in the amount owed (principal balance reduction), a alteration in the span of the mortgage, converting the loan into a lower, fixed-rate mortgage, and even refinancing of late fees and legal fees.
Saving money each month? Lowering my interest rate? Wow that sounds great. What's the catch?
Why would my bank help me?
Your bank has lost a huge amount of money due to foreclosures; most of the homes they foreclose on are underwater, meaning that the defaulted loans are significantly higher than the values of the properties. Sure, your lender will "lose" money when your payments go down, however, receiving any mortgage payment from you is better than no payment at all, or worse, having to foreclose on you.
How do I get a Loan Modification?
Friends, the name of the game is hardship. Well, it goes a little beyond simple hardship, but that's what we're going to start with. The first step to getting a Loan Workout is showing your lender that you simply can no longer afford to make your mortgage payments on time.
Now, different lenders observe different criteria for determining your "affordable" payment. Many lenders participate in Making Home Affordable, for example, wherein and aside from other guidelines, your "affordable" payment is 31% of your gross income (income before taxes).
Other lender's use different guidelines to qualify you. With Indymac, for example, the magic percentage of your gross income is 38% (under FDIC's Mod-in-a-Box program). This "affordable" payment is the total of your Principal, Interest, Taxes, Insurance, and HOA Fees (if applicable).
Still other lenders utilize an archaic system of totaling up your total net income, then subtracting expenses. For many "in-house", non-Government backed Home Loan Modification programs, lenders may use a combination of both qualification methods.
Acceptable Loan Modification Hardships
Reduction of Income. I.e. - Unemployment, underemployment, reduction in work hours, reduced pay, decrease in business earnings (if you are self-employed). Change in household finances. I.e. - Death in family, illness, divorce, incarceration, disability, adoption, child birth, care of relatives and family. Increased expenses. I.e. - ARM (Adjustable Rate Mortgage has adjusted or will adjust), medical and health care bills, utility bills, increased taxes. Insufficient assets. I.e. - Cash reserves are not enough to pay mortgage and basic living expenses. Monthly debt payments are too much! I.e. - Too many credit cards, home equity loans, other credit loans are choking me!
A Quick Guide to the Mortgage Modification Process
Write a Hardship Letter. Get on the phone with your loss mitigation department. Set realistic expectations, and document your conversation with your lender - start a log - called Countrywide, 12:00 pm Saturday the 29th, spoke with Dave regarding HAMP Home Loan Modification, faxing over required documents. Send required documents that your lender needs - Bank statements, tax returns, pay stubs, etc. Negotiate for the best terms that you can on your Home Loan Modification. Sign your Loan Modification agreement.
Alrighty, hopefully you've got a pretty good idea of what to do to get a Home Loan Modification. If you are in need of assistance, the best place to start is by contacting a Government Agency or your lender directly! Best of luck to all of the readers out there and I hope this helps!
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