5 Considerations For A Loan Modification

Recently, many people are discovering a new term which has never been heard before. It is called a loan modification. With the collapse of the Subprime lending industry and the deterioration of the average consumer’s credit, many people are starting to feel trapped. Until recently, there has been no option to help homeowners who are stuck in high interest rate loans and suffering from a hardship. Refinancing has come to a standstill. Banks don’t want to lend money because borrowers do not have equity in their home and also have credit issues. This is a risk that lending institutions are not willing to take now. However, the news is not all that bad. The government is stepping in and trying to help banks to offer modifications to their clients. This will ultimately help many consumers who are tapped in a high interest rate loan, reduce their monthly payment.

What is a loan modification? It is a renegotiation of the original terms of a consumer’s current loan. Another words, the bank improves the original agreement that was made at the time the loan was first originated. Different from a refinance, a modification does not pay off the borrowers existing loan. There are no closing costs or other fees usually associated with a mortgage. Many people are not aware that many of these modification solutions have some collateral benefits to other consumers (that don’t typically fit the profile that the banks are targeting). Here are modification tips to consider:

1-Credit is not a issue. It does not matter if you are on time or late with your mortgage. You could have excellent credit or a terrible payment history and still qualify.
2-Equity in your home is not required either. It does not matter if you have tons of equity or owe more than your house is worth-upsidedown. Sometimes, having little or no equity can actually help you with a principle reduction.
3-Length of Employment is not a factor. Employment gaps, change of jobs and reduction in income are not significant factors.
4-You don’t need to have a bad interest rate, or be in an ARM Loan. Many times this is a great alternative for consumer that is looking to refinancing, but does not have the money, equity, or credit to do so.
5-Lastly, you need to present your case in the strongest possible way in order to qualify for a Loan Modification. If you are not prepared, don’t understand the qualifying process, or fill out the budget forms incorrectly, you will be denied. It’s that simple. The Bank only gives you one chance to qualify. You can’t go back and change the numbers.

It is real very realistic to expect results that can reduce your payments by as much as 30% or more. This could represent a savings of $450+ for the average consumer. You don’t have to pay a professional to complete a modification agreement. If you have the knowledge and tools you can do it on your own and save $1,000’s. It is not, by any means, a difficult process.

By: joe p

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A mortgage professional with 20 years industry experience in all aspects of lending & loan modification. My banking experience extends from small Banks to larger institutions like Chase Manhattan Bank. I was formally trained as commercial lender & corporate credit analyst. My goal has always been to help the consumer obtain and maintain the best possible financing options. For more information visit Do It Yourself Loan Modification