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- What is a loan modification?
- As of December 2008, loan modification is the quickest, fairest, and most mutually effective way for homeowners and banks to prevent foreclosure. Banks use loan modification to reduce interest rates, loan balance and/or extend the term. By reducing the monthly payment, homeowners keep their house and resume paying a reduced monthly mortgage payment and the bank avoids taking back a house they cannot afford. In 2009, we expect 70 million homeowners to use loan modification to save their homes. Banks will make loan modification the number one banking strategy to keep them solvent.
- Why would my bank agree to a loan modification?
- The bank loses less money lowering your interest rate and mortgage balance than taking your house back in foreclosure. Let’s do the math on a $200,000 mortgage. The bank has two choices.
OPTION #1 - Getting 40¢ on the dollar reselling your house – $80,000 net to the bank - $120,000 loss to the bank. Plus they are required to escrow a foreclosure penalty of six times the loan amount totaling $1,200,000. That money goes into a vault and collects dust – not interest - losing interest and profits every day until that foreclosed home is sold.
OPTION #2 - Knocking 40% off your interest and principle. You do not need a calculator to figure out the best option. - What kind of loan can be modified using a loan modification?
- Almost any loan can be modified. However, we will not accept you as a client if we feel your loan cannot be modified. Our knowledgeable staff is highly trained to deal with all types of loans and lenders. We can help you prevent foreclosure on any type of loan. Our consultation is always free as we take our time in understanding our potential clients needs. Contact us today to find out how we can help you with your particular loan.
- I have spoken to my bank and they refused to help. Is there still a solution?
- Yes. Many homeowners have faced this exact situation. You would not be the first person to get nowhere with their lender only to be approved for a 35% loan modification. It all comes down to the team you have behind you.
- I am current on my mortgage, can I still qualify?
- Yes. Due to extenuating factors affecting you financially, you may be qualified. Banks do not require your being behind in payments.
- In utilizing the Loan Modification option to bring an asset current, can the mortgagee include all fees and corporate advances?
- Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.
- May a mortgagee perform an interior inspection of the property if they have concerns about property condition?
- Yes, the mortgagee may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the mortgagor's continued ability to support the modified mortgage payment.
- Can a mortgagee include late charges in the Loan Modification?
- Accrued late charges should be waived by the mortgagee at the time of the Loan Modification.
- When utilizing a Loan Modification option, can a mortgagee capitalize an escrow advance for Homeowner's Association fees?
- Mortgagees must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage.
- Is there a new basis interest rate which mortgagees may assess when completing a Loan Modification?
- The new basis interest rate is 200 points above the monthly average yield on U.S. Treasury Securities, adjusted to a constant maturity of 10 years.
- Will HUD subordinate a Partial Claim, should a mortgagor subsequently default and qualify for a Loan Modification?
- If a mortgagor subsequently defaults and qualifies for a Loan Modification, HUD will subordinate the Partial Claim.
- Are mortgagees required to perform an escrow analysis when completing a Loan Modification?
- Yes, mortgagees are to perform a retroactive escrow analysis at the time the Loan Modification to ensure that the delinquent payments being capitalized reflect the actual escrow requirements required for those months capitalized.
- Is the mortgagor eligible for the upfront premium refund at payoff of a modified loan?
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It depends upon when the closing date occurred. For assets closed:
After July 1, 1991 but before January 1, 2001, the 7-year unearned premium refund schedule shown in Mortgagee Letter 1994-1 remains in effect,
On or after January 1, 2001 that are subsequently refinanced, the 5-year refund schedule shown in the attachment of Mortgagee Letter 2000-46 applies, or
On or after December 8, 2004, refunds of upfront MIP are eliminated except, when the mortgagor refinances to another FHA insured mortgage. The refund schedule attached to Mortgagee Letter 2005-03 has been modified to a 3-year period. - Can a mortgagee qualify an asset for the Loan Modification option when the mortgagor is unemployed, the spouse is employed, but the spouse name is not on the mortgage?
- Based upon this scenario, the mortgagee should 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 mortgagee should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.
- How long will it take for me to renegotiate my home mortgage and my second mortgage loan?
- In most cases it takes 60 to 90 days. However, 120 days is common with lenders like who are backed up like Washington Mutual, Countrywide, etc. The trend lately has been much quicker with negotiated terms and modifications in 30-45 days. It is important to remember that each loan modification is unique and the time varies based on who your mortgage lender is and what your hardship details consist of.
- Are My Creditors going to continue to call me?
- One of the first steps with loan modifications is to contact and notify your servicing lender that we are representing you and demand they cease harassing you. It often takes up to thirty days for your lending company to acknowledge our settlement or loan modification requests.
- What if my mortgage company won't approve us for a loan modification?
- Now more than ever, mortgage companies and banks understand that if they do not provide revised loan terms or settle for a portion of the debt to be paid that they will more likely than not get any money. Banking institutions are aware of the declining housing market. They know that at a certain point, they have to take what they can get. Most of them will settle very quickly, avoiding the cost of foreclosure and recovery actions. In the rare event that a creditor won't settle with our offer, they will return with a counter offer that will be favorable to you. There are many options to prevent foreclosure if you act soon enough.
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HomeLoanModifications.org has no control over the Provider's obligations, and makes no representations or warranties with respect to the Provider's performance or that the provider can make sure that the lender adheres to the answers in the FAQ's. The FAQ answers are accurate to the best of our knowledge but are subject to change at any time. The FAQ answers are not intended to be legal advice nor are they intended as a substitute for legal advice and are provided as a convenience and may not be relied upon as accurate.