1)
What is a Loan Modification?
A
loan modification or loan workout is a permanent
change in one or more of the terms of a mortgage.
It is a long-term solution to remedy a borrower's
inability to service the payments on a loan
that is not financially viable. Loan modification
changes the terms of the existing mortgage
note, it is not a refinance. Performing a
thorough analysis of the current financial
situation, revealing the hardships, and presenting
an offer based on the lender’s requirements
are needed in order to obtain a financially
viable solution. It is our mission to determine
what an affordable financial solution is for
you and guide you through the process of obtaining
it. Our goal is to identify and obtain a solution
for you that will allow you to survive financially
in the current distressed economy.
Homeowners
faced with foreclosure should waste no time
and consider acting as soon as possible to
seek relief.
Most
loan modifications may involve:
- a
reduction of the interest rate
-
an extension of payment terms
- a
rate fixed for 5 years
- a
forbearance on amounts owed
- potential
reduction of principle balance
- any
combination of above
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2)
What are the advantages of getting a loan
modification?
With
loan modification, we can help you:
- reduce
your interest rate as low as 2%
- lower
your monthly payments as much as 60%
- reduce
your loan balance
- fix
your interest rate
- rescind
foreclosure sale date
- waive
past due payments and fees
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3)
Do
I have to be in default to qualify for a
loan modification?
No.
However, the reality is that lenders simply
aren’t interested in helping homeowners
that continue to make unreasonable payments
and who aren’t willing to help themselves.
They will always accept your cash voluntarily,
unless it is in their best interest not to
do so.
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4)
How do lenders determine which loans are
prioritized for modification?
Most
lenders prioritize modification candidates
by whether or not payments have been missed.
This is the plain and simple truth. As a borrower
you will need to weigh the pros and cons of
whether or not to continue to make sometimes
obscene and absurd payments.
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5)
What are the chances of getting a loan modification
if a Notice of Default has already been
received?
Very
good! However, this will depend on the lender
and how quickly action is taken.
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6)
Is it possible to get a loan modification
after bankruptcy has been filed?
Yes.
We have obtained a loan modification for a
client in bankruptcy.
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7)
If my loan has previously been modified,
will I still qualify for another modification
for the same loan?
Maybe.
The real issue is whether or not there is
a financially viable solution based on your
income and the lender’s willingness
to make a deal.
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8)
Are there instances when loan servicers
can't help modify my loan?
Yes.
The primary reason would be a borrower with
no proof of verifiable income.
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9)
Will my missed payments and late fees be included
in the modified loan?
Yes,
late fees will generally be waived and your
delinquent payments will be rolled onto the
back of the loan.
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10)
What is the difference between a modification
agreement and a forbearance agreement?
A
forbearance agreement is generally a short-term
reprieve for borrowers and does not permanently
solve the financial problem, while a loan
modification agreement is a longer-term solution
designed to fix a financially viable payment
for an extended period, usually 2 to 5 years.
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11)
In a loan modification agreement, can the
mortgagee include all PITI arrearages (principal,
interest, taxes, insurance) in order to bring
the asset current?
Yes.
Fees may be included in the mortgage balance.
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12)
May the mortgagee be allowed to do an interior
inspection of the property?
Yes.
The mortgagee may conduct an inspection of
the property as it deem necessary to evaluate
whether the property’s condition will
have an effect on the borrower’s ability
to pay the modified mortgage payment.
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13)
Can a mortgagee capitalize an escrow advance
for Homeowner’s Association fees?
Yes.
Mortgagees must also escrow funds for those
items which if not paid would create liens
on the property.
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14)
What happens to the principal balance after
loan modification?
The
modified principal balance may exceed the
original balance by the amount of the late
payments rolled onto the back of the loan.
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15)
If am qualified for loan modification, what
happens to my adjustable rate?
Loan
modifications may reinstate your loan at
a fixed rate.
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16)
Should new loan amount after loan modification
be recorded?
Mortgage
workouts that increase the amount of the original
mortgage may be recorded.
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17)
Why do lenders prefer refinancing than loan
modification?
So
that the lender can pay off the old delinquent
loan, show a new current loan on their books,
and receive fees for doing so.
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18)
What information is needed for a typical
loan modification financial worksheet?
A
loan modification financial analysis will
include all total household expenses, especially
what is reported to credit. The new payment
is based on what you can afford given your
total take home household income, taking into
consideration fixed obligations.
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19)
Will loan modification reflect negatively
on my credit?
Maybe
but not necessarily. Lenders are currently
evaluating new criteria to characterize modification
to reflect the fact that millions of homeowners
are simply seeking financially viable solutions
to their economic survival. This does not
mean they are necessarily bad credit risks.
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20)
Can I modify my second mortgage?
Yes.
A 2nd mortgage payment may be substantially
reduced, settled, or extinguished altogether.
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Loan
Mod Qualification FAQ's
1)
Can I apply for loan modification even if
I am qualified to refinance?
Yes.
It is in the best interest of a borrower to
explore the best case financial solution.
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2)
Can I modify my mortgage if my payments are
current?
Yes,
but it will be more difficult to accomplish.
Each borrower should seek out the best case
financial resolution to their situation. Our
job is to help clarify your economic reality.
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3)
Having a negative equity in my house has prevented
me from refinancing. Will negative equity
prevent me from modifying my loan?
No.
Having a negative equity is one of the primary
reasons to seek modification, unlike refinancing.
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4)
I know that I have a bad credit. Will this
be a problem with loan modification?
No.
Unlike refinancing, a low credit score will
not hinder your qualification for a loan
modification.
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5)
What are "hardships" and do I
qualify?
Here
is an example list of hardships that lenders
consider during the loan workout process:
- Adjustable
Rate Mortgage Reset- Payment Stock
- Illness
- involuntary
Loss of Job
- involuntary
Reduced Income
- Failed
Business
- Job
Relocation
- Death
of Spouse or C0-Borrower
- Death
- Incarceration
- decline
in refinance
- over
90% loan to value
- upside
down or under water regarding property
value
- Divorce
- Marital
Separation
- Military
Duty
- Reduced
Income
- Medical
Bills
- Damage
to Property (natural disaster or unnatural)
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6)
When is a mortgage considered delinquent?
A
mortgage is considered delinquent when the
borrower fails to make current his scheduled
payments.
30
days - Lenders report monthly to
the credit bureau any default in payment.
Therefore, every default would mean a lower
credit score
90
days - At this point, most lenders
file a "Notice of Default"
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7)
What is a mortgage escrow?
Escrow
accounts are used by mortgage companies to
collect money from the borrower on a monthly
basis to guarantee timely payment of real
estate related expenses such as property taxes
and home owners insurance. Lenders can keep
an annual reserve cushion amount equivalent
to two-months of each recurring expense.
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8)
What are primary and secondary lien holders?
The
primary lien holder is the first lender to
record a mortgage lien on the property. All
succeeding lien holders are called secondary
lien holders. On the occasion of a foreclosure
or sale the primary lien holder gets paid
off first and any remaining funds go to pay
off the secondary lien holders.
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9)
Can I get relief for my delinquent loan
payment if I am a disaster area victim?
Yes
you can. If you live or work in an area declared
a disaster by the President and natural disasters
or man-made events has caused damage to your
home or reduced your income, your lender will
provide disaster relief for 90 days on an
FHA-insured loan and in most cases, even for
other types of loans.
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10)
Are military personnel and spouses entitled
to debt payment relief?
The
Service Members Relief Act of 2003 (formerly
the Soldiers’ and Sailors’ Civil
Relief Act of 1940), limits the interest that
may be charged on mortgages incurred (or acquired)
by a service member (including debts incurred
jointly with a spouse) before he or she entered
into active military service. Mortgage lenders
must, at your request, reduce the interest
rate to no more than 6% per year during the
period of active military service and recalculate
your payments to reflect the lower rate. This
provision applies to both conventional and
government-insured mortgages.
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Foreclosure
FAQ's
1)
What is Foreclosure?
Home
Foreclosure is a process by which a lender
regains a property which they have financed.
Typically, this is because the borrower is
behind on house payments. When the lender
forecloses the homeowner must move out of
the house. There is a legal time frame, which
varies from state to state, which determines
how long the foreclosure process can take.
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2)
How does foreclosure affect my credit?
A
foreclosure is considered one of the worst
items that can appear on your credit report
and will stay on your credit report for 7
years. It will be very difficult, if not impossible,
to be qualified for another market rate mortgage
for at least 3-4 years after foreclosure.
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3)
What is a deficiency judgment?
A
deficiency judgment may be held against the
borrower when the first or second mortgage
is not fully paid after a property is sold
due to a mortgage foreclosure. The homeowner
is still liable for the balance due on the
unpaid mortgage even if he has already lost
his home due to foreclosure. However, there
are measures that can extinguish or waive
deficiency judgments. This is a very important
consideration and laws vary by state.
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4)
How
do we stop foreclosure?
Our
company specializes in resolution of mortgage
delinquencies. Our first priority is to contact
the lender to waive or postpone the foreclosure
sale date. We cite your lenders loss mitigation
policy and your state's foreclosure law to
let them know that we can resolve the matter
outside of foreclosure, and at least so far,
we have never had a client foreclosure.
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5)
How long do I have to act?
Time
is of the essence when you are behind on payments.
Time is not your friend in this situation.
However, once we submit to the lender that
we are acting to assist a client to seek a
viable resolution, time becomes our friend.
Each day that passes makes it easier to get
a work out agreement with the lender that
is viable. The home foreclosure process can
take anywhere from a few weeks to many months
depending on your state law.
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6)
Do
I have enough time to stop my Foreclosure?
Until
the foreclosure sale actually occurs, foreclosure
may be halted or extended. If a sale date
for your home has been set you need to act
quickly. Generally we would like to have about
2 weeks to get it waived or extended.
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