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Skip to content. What is a Loan Modification? Your lender may even use a combination of the three: Extend the life of your loan Lower your interest rate Lower the loan principal not common Who qualifies for a Loan Modification?
Pros of Loan Modification If you are behind on payments and the foreclosure process already started, the modification process might put the brakes on the foreclosure and encourage the lender to move forward.
What do you do if you believe a loan modification might be the answer to your problem? Collect your Financial Information: Gather all of your financial information before you contact your mortgage company. You will need the overall budget for your income and expenses.
Collect your Mortgage Information: Make sure you contact your current mortgage company. Start with the most recent bill sent to you to collect the monthly payment. Most importantly, you want your mortgage account number in hand. Call your Mortgage Company: It is excellent if you can get all your ducks in a row before you make the call. Get the ball rolling, ASAP.
Being prepared will save you some frustration. She applied again for a loan modification. Throughout the rest of the year, Mena fought to get her home back. In late October, Mena learned that the foreclosure had been retracted.
She is still working on completing her loan modification. The loan modification process can be extremely challenging. Yet for some families, the struggle is worth it — especially when they can get help from California loan modification attorneys. One of the criticisms of loan modifications is that they do not eliminate any of the principal owed. For homeowners caught in upside down mortgages, they can use bankruptcy to remove second and third mortgages , putting them on even better financial ground once the bankruptcy is complete.
Even when mortgages are not underwater, Chapter 13 bankruptcy can be an effective means of shedding other debt while getting caught up on the most important obligation, a mortgage, without fear of foreclosure. If you are facing foreclosure and are looking for ways to save your house, you should speak with a Los Angeles bankruptcy attorney to review your options. Steve and Linda we changed their names purchased their home in They signed the paperwork, consolidated their debt, and made some property improvements.
Then Steve was laid off from his job as a crisis training specialist the next month. It took him almost a full year to find another position, which only lasted for six months. They struggled to make their mortgage payments with the new structure, even resorting to using an insurance check meant for their car to cover the expense. They ended up using the deed-in-lieu program to get out of the mortgage after trying to hold onto the house for almost 3 years since refinancing was not an option for them at the time.
HAMP could help homeowners who needed restructuring, but it could not solve their long-term loss of income issues. There were lots of roadblocks in the way of the approval process. Karen Mena and her husband found themselves struggling with their home in San Bernardino after their business went under.
They had refinanced their home several times during the housing boom, but by , they were in dire straits financially. It took them over 2. They would receive rejections because the paperwork was reportedly never received, there were missing financial documents, or the paperwork was improperly completed. By August , the Los Angeles Times reported that the Mena family received a threat of foreclosure.
They applied again for a loan modification. In when the Home Affordable Modification Program changed to allow two tiers of modification, the net-present value NPV calculation became one of the most significant components of the application process. Each tier had its own complex calculation that it followed to determine what the best outcome for the investor would be. The test predicated modification if the investor would make more money that way instead of foreclosing on the property.
If the NPV showed that the investor would make more by foreclosing, then the program shifted to either short sale or deed-in-lieu processes to encourage the affected household to leave without damaging the home on their way out.
There was no guarantee of a permanent status under HAMP. When homeowners applied for the Home Affordable Modification Program starting in , they were usually granted an approval for a trial modification under the terms of the program. Under this structure, you were asked to make all of your trial payments according to the terms and conditions of the MHA program. There were roughly the same number of people rejected after completing their trial modifications as there were accepted for the program, sometimes only because their income level turned out to be inadequate.
Lenders could demand a full payment on the difference after the trial period. One of the biggest shocks that some homeowners encountered with their mortgage lenders through HAMP was that after the trial period, they could demand that you immediately repay all of your savings if denied permanent status.
That meant the difference between the original payment and the reduced amount was due immediately. Since the trial program could go for five months before you received a final decision, the difference was several thousand dollars for some homeowners.
There was no guarantee that you could actually save money with this program. The loan modifications that were available through the Home Affordable Modification Program were intended to help save homeowners money in some way.
There are homeowners who were able to work out an extension or change in terms so that their mortgage became a year product instead. Many homeowners discovered that attractive terms for a short-term solution could create long-term problems.
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