Frequently Asked Questions
What is a Loan Modification?
Answer: After a hardship has occurred, your lender may be willing to re-negotiate the terms of your loan to fix and lower your rate, reduce your principal, or extend the term. Any combination of these will lower your payment and allow you to stay in your home.
Who qualifies for a Loan Modification?
Answer: Any homeowner who has experienced hardship due to an increase in payments from an adjustable rate, a negative amortization loan (neg-am, pick a pay, etc...), loss in income, or any other reason may qualify.
What is the benefit for me? What is the benefit for the lender?
Answer: After the Modification, you will have lower payments so you can stay in your home. Your investment is protected and you will regain your equity over the next 3-5 years. Even though the bank will take a loss by lowering your interest rate and principal balance, the loss may be less than if they have to foreclose and attempt to sell. It's really a win-win and the start to solving the main problems facing our economy today.
How long will this take?
Answer: Typically, it depends on where you are at in the foreclosure process. It can take as much as a couple months, but if a Notice of Default of Notice of Trustee's Sale has been filed, a higher priority will be placed as there is a pending deadline.
Are there any fees involved?
Answer: Yes, but they are 100% refundable if we do not find a solution for you. This increases our level of commitment to you by making sure you get the help and attention you deserve.
In utilizing the Loan Modification option to bring my mortgage current, can we include back-interest and fees?
Answer: Yes, often your lender will excuse these fees and even lower your principal more. HUD recommends banks waive all late fees.
Will my lender require an appraisal or inspection?
Answer: Yes, the mortgagee may conduct any review it deems necessary to verify the property's current value and condition. This typically results in an 'upside down' situation, making the lenders more likely to modify your loan.
When utilizing a Loan Modification option, can a lender escrow advance for Homeowner's Association fees?
Answer: HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow Obligations states:
Mortgagees must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the insured mortgage. This means any back association dues or taxes must be brought current by your lender.
Is there a new basis interest rate which mortgagees may assess when completing a Loan Modification?
Answer: Yes, Mortgagee Letter 2008-21 (HUD) states that the new basis interest rate is 2% (margin) points above the monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of 10 years (index.)
Is Escrow required when completing a Loan Modification?
Answer: Yes, escrow will be opened to make sure amounts needed to bring taxes, interest and any other dues current are accounted for.
Can we qualify for the Loan Modification option when I am unemployed, my spouse is employed, but the spouse name is not on the mortgage?
Answer: Based upon this scenario, the lender will conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new modified mortgage payment, but insufficient to pay back the arrearage. Once this process has been completed the lender will determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.
