How a Loan Modification Can Stop Foreclosure
If you have a sale date already scheduled, please don’t waste anymore time and use the form below to contact us and see if you are qualified for a loan modification. A loan mod can drastically lower your payment and eliminate all your arrears!
Depending on your exact situation, your lender should want to consider a loan modification. With a modification, it’s possible to refinance the debt and/or extend the term of your original mortgage loan.
This will make your new monthly payment affordable and allow you to build the missed payments into the new 30 year loan.
Loan modifications were very hard to come by in the past, but now, with all the new lending laws and government assistance, a modification can be as simple as correctly filling out the application. Although, hiring an attorney or mitigation expert is still a good idea.
You do not want to attempt a loan mod on your own unless you are absolutely sure it will get approved. You need to make sure it’s done right the first time, or you could ruin your chances of making a second deal in the event you are turned down once.
A mortgage modification makes it much easier for you make your monthly payments and catches you up on your arrears.
Example Loan Modification Scenario
First, it’s important to know that there are many different modification programs and loan bailout plans. To qualify, you may need to meet certain circumstances. For example, there is a new government mortgage plan that will reduce your interest rate and re-amortize your loan, but you need to be current on the mortgage. If you have any late loan payments, you will not qualify. But for other plans, you need to be late on the mortgage. Usually when you are 60 days late or more, your lender should be willing to talk to you directly about modifying your loan. But it’s important to understand which type of loan or modification you should be applying for. Use the form above and we’ll try and help you determine which plan is best for you.
Here is a typical loan mod example:
Lets say your mortgage payoff is $200,000 and your current interest rate is an adjustable 9.35% and you are currently 5 payments behind on a $2300 mortgage payment.
For this example, lets assume you owe $200,000 and owe an additional $12,000 in arrears, for a total of $212,000.
Lets also say that based on your income, you can only afford a $1800 a month payment.
Based on these numbers, a loan modification we would try to negotiate would be a new 30 year fixed mortgage at 5.5%. This is a reasonable interest rate (we’ve seen rates negotiated as low as 2.5% or even 0% for a short time) and we would never stretch a loan out to longer than 30 years. It’s just not reasonable to pay on a loan for that long and the cost is much higher. In fact, we’d rather do a 15 or 20 year loan with a lower interest rate, to make it more affordable. This is better for your long term financial recovery.
With a modification, in this scenario, the new payment is nearly cut in half!
In this case, a modification would save about $600 a month after taxes and insurance are paid.
To qualify for a modification, first you’ll need to prove there was a hardship or lender misconduct that caused the loan to become a problem. Then you income will be used to determine if you qualify for a modification. this is where it can get tricky. If the forms are not completed correctly, or if your situation doesn’t fit the lenders exact mold, then you may be immediately turned down. Once you are turned down, the lender will likely automatically turn down any future attempts to correct the problem as well.
This is where hiring a professional can be of great value. Knowing that it’s going to be done correctly the first time is invaluable. Also having someone to negotiate when your situation doesn’t fit the lender’s exact “mold” is almost a necessity these days.
One mistake many people make when attempting a mod is to apply for it, then expect the foreclosure process to stop. This is why many people come to us just days before a sale asking for help. It’s important to stay on top of things and to never trust your lender to automatically stop the sale for you.
Until your loan statement shows that you are current on your mortgage, or until you have something in writing that says your loan is current, you should always assume the worst!
The easiest and fastest way to find out if you qualify is to complete the evaluation form above, and receive your free, customized e-book that contains instructions, guidelines, and documents that can be used to stop foreclosure using a loan modification.