What is Loan Modification and how to qualify?
Have you been hearing a lot about loan modifications? Do you know what a loan modification is? Is loan modification for you? How can you avail of loan modification?
A Loan Modification is a way to renegotiate your current mortgage with the ultimate goal of placing you into a fixed rate mortgage or reducing your interest rate or monthly payment. In other words, many aspects of your mortgage can be changed to your benefit, including the term of the loan, interest rate, balance of principal and monthly payments. A Loan Modification will change your existing mortgage note and give you a fresh new start in managing your home. Your account will be brought up to date immediately. Most importantly, a loan modification is not reported to the credit agencies and will not have an adverse impact on your credit scores.
Every lender has different criteria of qualifying you for loan modification, but you have a greater chance of success if you meet the following:
- … no longer qualifies for a refinancing
- … currently in an adjustable rate mortgage (ARM)
- … have fallen behind on your mortgage or foresee falling behind on your mortgage due to financial hardship
- … are self employed during tough economic times
- … are currently “upside down” (owing more than your home is worth)
- … are about to go into foreclosure
Will your lender be willing to modify your loan? Absolutely – It is very expensive for them to foreclose your house. With the current economy, your lender would rather work with you and continue to get paid monthly rather than going through the foreclosure process, especially when their core business is not in real estate. But your lender cannot make any adjustment or modification on your loan agreement without you taking the initiative of requesting for it.
The key to a successful modification focus on your willingness, you must be willing. Willing to work things out with your lender, willing to continue your payment diligently, willing to take the necessary steps to ensure a successful modification, most importantly, to take action right now.
The most important factor to determine if your loan modification will be successful is to take immediate action. Many homeowners don’t qualify for a loan modification because they have waited too long to act. So take charge of your situation by contacting us today.
Why Refinance When You Can Modify?
If ever you’re in a situation where you have to choose between refinancing your existing loan and modifying it, the decision would take course upon getting the feel of the current trend that’s going on. You need to know about the facts in a way that is more understandable.
At this point it would be much easier if we compare and contrast:
What is Refinancing?
Refinancing is the refunding or restructuring of debt with new debt, equity, or a combination of both.
Lenders often require an upfront payment of a certain percentage of the total loan amount as part of the process of refinancing debt. Refinancing is frequently very difficult because of a negative equity or upside down situation.
What is Loan Modification?
A Loan Modification as defined in the HUD website is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford.
It is a process whereby a homeowner’s mortgage is modified and both lender and homeowner are bound by the new terms. The most common modifications are lowering the interest rate, reducing the principal balance, ‘fixing’ adjustable interest rates, increasing the loan term, forgiveness of payment defaults & fees, or any combination of these.
The thing is that in refinancing, the value of the property depreciates and with it is the case that the loan is to be restructured with new debt thus, resulting to a negative equity. An upfront payment would also be required by lenders. In loan modification, the existing loan would only be reinstated so there would be no risk of having to put the property on a negative equity and upside down situation.
It would therefore be safe to say that opting for a loan modification instead of refinancing would indeed be a wise choice among those who are currently behind on their mortgage payment and is in trouble of losing their house to foreclosure.
Allow us to help you decide on which action to take. It would be very beneficial on your part if you would look further into the details of the process and we can help you on that. Contact us at American Legal Network Online, we would be more than glad to answer any inquiries that you may have.
How to do a Loan Modification
The basic principle of loan modification is that you’re renegotiating the terms of your mortgage with your lender on the basis of the current financial hardship that your are experiencing.
The process of loan modification can be somewhat confusing and taxing for homeowners in need of solving concerns regarding their mortgage situation. It’s not as simple as it may seem because there are a lot of things to consider. Getting the proper representation would be the ideal thing to do in order for you to get a better deal out of the whole situation.
Here are the basic steps in loan modification.
-
CONSULTATION: This is the initial procedure in order for you to determine the status of your present situation; analysis of financial situation; pre-qualification if loan modification would be appropriate for you; initial talk with the lender (proposal); and decide whether to proceed with the process.
-
DOCUMENTATION: Here is the part where all the paperwork comes in. You need to provide the following documents:
- Recent bank statements
- Recent payroll stubs
- W2s
- Hardship letter
- Legal notices
- Recent mortgage coupons
- Financial disclosure
-
NEGOTIATIONS: This is where the analysis, consideration and examination of your situation would be done. This is also the time where the loss mitigation department of your lender has made some type of decision or makes a response to your proposal.
-
APPROVAL: This is when the lender decides on your modification request and whether for you to accept the offer/decision.
Remember, this is just a simplified procedure and there are a lot of things that are needed to be done in each of the process.
It would be better for homeowners to consult and employ the services of a Loan Modification Company that is equipped in dealing with the matter.
Call us for a free initial consultation. The inquiries and information that you would require is our business.
Foreclosure and The Current Housing Market Status
According to a statement made by FHFA Director James B. Lockhart on a speech he made during the celebration of Veteran’s Day last November 2008, foreclosures hurt not only families, their neighbors, whole communities, but in fact, the overall housing market.
We all know the statement to be true. In fact a lot of homeowners whose houses are currently on mortgage are having a hard time coping up with their monthly payments. The truth is that delinquencies on mortgages have tripled, thus increasing the number of foreclosure at a high, which is 150% as compared to the 2 years past. The effect of this to the overall housing market is that housing prices have fallen drastically.
Now, what are the implications of this to a homeowner who already is delinquent on mortgage payments and now owns an ‘upside down’ property?
Let us say for instance that you’re one of those homeowners. The implication is that you have to choose whether to:
- Foreclose
- Short sell
- Retain Ownership
The good news is that you need not worry if in case you’re behind on mortgage payments, facing foreclosure, and owning an ‘upside down’ property. You need not give up ownership of your house and opt for foreclosure because you don’t want to lose the one thing that you’ve worked hard to acquire. You also need not sell your house short.
Retain ownership! That’s the best thing that you can do. Apply for a ‘Loan Modification’, that is the best option you have in order for you to retain ownership of your house, be able to maintain regular mortgage payments, and have the financial freedom to spend your hard earned money for other things that you need.
Call us and learn more about ‘Loan Modification’. American Legal Network Online can help you make the difference. Be part of the relief in the hurting housing market situation. Act now!
What Lenders are Looking for to Grant a Loan Modification
As much as possible, banks do not want to foreclose on a homeowner. They would rather grant loan modification on an existing homeowner’s loan rather than foreclose the property. But this doesn’t mean that bank readily grant loan modifications to all those who are requesting for it. There are guidelines with which to adhere and the borrower should be able to comply with it.
To get a modification, you need to be able to make payments. That is why in a loan modification, the lender and borrower would renegotiate on an existing loan and agree on a new payment scheme. This new scheme would have to be effective enough in order for a borrower continue paying the loan.
Here are some cases wherein loan modification qualification is based:
-
Homeowners in default or at risk of default may qualify for loan modifications, which restructure the terms of loans.
-
Anyone with high combined mortgage debt compared to income or who is underwater may be eligible for a loan modification.
-
Borrowers will have to prove they have sufficient income to be able to keep up their loan payments.
-
Those who are seeking for loan modification should also explain in detail what made them fall behind on payments and show that it was out of their hands.
-
Lenders will also look at your previous mortgage statements to see how you handled it before you fell behind.
Understand that a loan modification is a negotiation between you and your bank. Be smart when you are working on your modification. Use your leverage and don’t be intimidated. Banks wants you in that home making your steady monthly payment. Use a realistic, reasonable and documents supported proposal, banks should eventually agree. You are trying to work out an agreement with your lender and you need to convince them that your proposal is worthy of their consideration. Banks do not want to foreclose as much as possible. Any bank would rather collect lower payments than none at all.
Learn more on how to qualify for a loan modification. American Legal Network Online gives obligation-free pre-qualifying consultation on the matter.
How to Avoid Loan Modification Scams
The idea of losing a house to foreclosure is painful enough to accept. What more if with that thought is the reality that what you believe might help you, actually will just add an insult to the injury that you have.
A lot of predators are out there preying on the innocent and especially those who are in dire need of immediate assistance. These are the loan modification companies who on the outside may look legit, but on the inside are just out there with but intention – to scam you.
Avoiding Loan Modification Scams is not quite easy as it may seem. Do take note that these companies posing as legit painstakingly took the effort of studying the ins and outs of the business. You need to be equipped at least with the basics on how to spot such scams and thus avoid it.
Here are some red flags on how to spot loan modification scams.
- Readily approves your application without even discussing the terms and conditions of the loan modification agreement.
- Ask for upfront payment even before your application is approved.
- Gives specific instruction not to contact your lender.
- Offers to fill out all the paperwork for you and force you to sign it.
- The company’s offers sounds too good to be true.
These are just some of the things that you might want to consider first before dealing with a loan modification company. Remember, your home is at risk of foreclosure, you want to save it so be careful on whom you’re dealing with. It doesn’t hurt to ask or inquire. It is wise to contact a reputable and responsible loan modification company.
Desperate people make easier targets. This is one thing scam artists are looking for… they would promise everything but deliver nothing. Do not fall prey to these kinds of people. This is the last thing that a person about to lose their home needs to deal with. Be vigilant enough to always consider the person that is offering you the modification.
The presence of scam artists does not mean hiring a modification company is a bad idea. If you do not have the time, energy, and patience to do it yourself, outsourcing the responsibility is an option that you can consider doing. There are a lot of good companies out there that want to help you. Have time to do an intensive research regarding a loan modification company that you might want to deal with.
Call us at American Legal Network Online. The sooner you act the more chances you have in saving your home and making sure of it.
Hardship Letter
The hardship letter is an explanation of why a homeowner is delinquent on their mortgage payment, and explaining how certain event or series of events affected their financial situation. This is one of the prerequisite by lending companies in order for them to clarify the situation of a homeowner’s loan modification proposal.
Creating a well written hardship letter would be very helpful for a homeowner in order to give a significant reason for the need to modification an existing loan. The letter would need to be very specific, backed up by evidence of the hardship, and substantiate that the situation is temporary. It needs to be brief and direct to the point.
The letter must state the following:
- Your hardship.
- Your proposal to resolve your debt.
- Thanking them for their time and probable consideration.
- Your current contact information.
Examples of hardship are:
- Divorce/Marital Separation
- Damage to Property/Natural Disaster
- Business Failure
- Job Relocation
- Death in the Family/Spouse
- Adjustable Rate Reset
- Loss of Job/Pay Cut/Reduced Income
- Increase in Debts/Payments
- Incarceration
- Victim of Embezzlement/Crime
- Medical Bills/Medical Emergency
- Military Duty
- Temporary Disability/Illness
The hardship letter is one of the most crucial elements of your loan modification package. Be cautious, it is important that you get it right and would easily be understood.
Consult us and be prepared well enough to deal with your loan modification.
Standard of Living Bubble
A standard of living is generally measured by standards such as real income per person and poverty rate. In most cases, people tend to forget that they need to spend based on what they earn. What normally happens is that consumers are living beyond their means for an extended period of time. This created the concept of the Standard of Living Bubble.
Standard of Living Bubble is the concept of consumers living beyond what they can actually afford. They are relying on credit to feel rich, instead of relying on increased real wages. People are spending more than they earned, more and more people are being sucked in a vortex of credit spending until such time that they become ‘underwater in debt’ and couldn’t get out of it. Debts become unmanageable at the point that most of these consumers are now in a state of financial hardship.
Finding relief in this troublesome times is what most people are looking for right now in order to avoid bankruptcy. It would also be a relief to all consumers knowing that there is a way to make all their debts become manageable.
There is a solution to all this. A debt relief program designed to help consumers suffering from financial hardship. The program’s goal is to reduce the overall amount of the debt, by negotiating payoff amounts with creditors. In exchange for an agreed-upon one-time payment — for instance, half of what owed — the creditor forgives the rest of the debt. It thus help consumers free up more cash instead of spending them on monthly payments.
Call us and see how you can get out from the effect of the standard of living bubble.
Getting Rid of Debt and Avoiding Bankruptcy
More and more people are experiencing the effect of the financial crisis that’s been going on right now. A lot are having grave concerns about how to ease the burden of financial hardship brought about by unpaid and unmanageable debts that they owe. Those who are in multiple debts are feeling the pressure from credit collectors that’s after them for their payments. There seem to be no way out of the situation, no other alternative but to file for bankruptcy. You might even be one of those people.
There is still an option in order for you to avoid bankruptcy and make those piling debts become more manageable.You can always consolidate your credit card balances and other unsecured loans to save money by paying less in total payment and get rid of debt faster.
The process of debt settlement does just that. With debt settlement, you can consolidate all unsecured debts that you may have and work out a payment scheme that is quite affordable, at a shortest possible time, and for just half of the total amount that you owe.
Call us and we can show you how to get rid of your debts and avoid bankruptcy as well.
Debt Settlement
Debt settlement is a plan to renegotiate the amount of unsecured debt you owe so that the amount paid is less than that owed, yet is accepted as full payment of the debt.
It is a process of negotiating payoff amounts with your creditors. In exchange for an agreed-upon one-time payment — for instance, half of what you owe or 50% of the principal balance — the creditor forgives the rest of your debt.
Only unsecured debts are the ones that can be considered in debt settlement. These unsecured debts are:
| Unsecured Credit Cards | Unpaid Overdue Rent |
| Unsecured Personal Loans | Past Due Utility Bills |
| Unpaid Medical/Hospital Bills | Auto (repos) |
| Gas/Oil Cards | Department Store Credit Cards |
