Loan Modification FAQ

A Loan Modification is a permanent change in one or more of the terms of your loan creating a brand new contract between you and your lender. Modification companies work with the lender to create a new contract that will reinstate your loan and give you a fresh start by restoring your credit status.
What terms a lender will agree to largely depend on your ability to pay and what would make the most economical sense for both parties.

  1. Adding the delinquent balance to the loan. Rather than require payment up front, the lender may choose to add the balance owed to the new loan terms ensuring you will eventually pay it back;
  2. Reduce the interest rate. You’ll need to prove that a rate reduction can positively affect your situation and allow you to resume making timely payments;
  3. Extending the years due. By adding years to the loan, the lender is able to reduce the monthly payment knowing that they will recover the amount later on;
  4. Reduce the balance owed. Under some circumstances, the lender may elect to reduce the balance of the loan. To do so, they’ll want to be absolutely sure you will be able to make the new payments.
Are you wondering if you might be a candidate for loan modification? Many homeowners and by many, we mean thousands if not millions are finding that a loan modification is the right solution for a failing mortgage. How do you know if you should pursue a loan modification?

  1. Tried to refinance but got turned down. Many homeowners with adjustable rate mortgages are trying to refinance but simply can’t qualify under stricter lender guidelines. When the housing market began to decline and lenders were forced to cut back or even close the doors altogether, it became much harder to get a loan. As such, homeowners aren’t getting the help they need. Loan modification, however, is proving a viable way to work out an agreement when refinancing isn’t possible;
  2. Suffered a hardship. In this tough market, people are getting laid off from their jobs and have no means to pay their monthly mortgage. Others are dealing with the issues that pop up throughout life. Family illness, accidents that cause injuries, a decline in income and unexpected events are all legitimate reasons for falling behind on a mortgage that would otherwise be getting paid on time. Lenders are pretty open to workouts for hardships, especially when you show an ability to pay in the future. You’ll need a hardship letter to present this to the lender;
  3. Simply can’t keep up with the mortgage. As the economy and individual markets suffer, many people are seeing once stable and predictable income decline to a point that they can’t afford their home any longer. It’s possible a loan modification agreement can be reached that would bring payments to a more affordable level. This is an especially attractive possibility if you can show your income will again rise to previous levels.
Yes, but it really depends on the results you want to achieve. Law firms which specialize in loan modifications employ loan mitigators whose only job is to work with lenders and modify loans. By letting them do what they do best you will get better results without the stress and effort. A loan modification specialist knows how to deal with lenders and have in-depth knowledge about how these institutions work. They can potentially save you thousands of dollars and save you the time commitment required to achieve an effective resolution. Law firms deliver with professional representation and the critical information that you need to get the best possible workout agreement with your lender.
As programs like loan modifications grow in popularity, a good question to ask is why some people are given a loan workout while others are denied. A big part is that people don’t know how to negotiate with a lender and do the wrong things causing them to being denied. Another aspect is going after the wrong program. Every borrower’s situation is unique and has certain things that will work and others that won’t.

Loan workouts take more than just asking nicely. You have to craft a picture that includes finances and hardships. It has to be presented to the lender in such a way that convinces them to work something out.

With that said, there are some principle things to consider on your way to working out a solution.

It’s about the money

The first thing you have to realize is that it’s all about the bottom line. A lender is willing to work with you on a solution if it makes sense to their own bottom line. It sounds harsh, but it’s the truth. The good news for borrowers in trouble is that foreclosure is expensive to the lender and more times than not, they consider it an unfavorable outcome. That leaves a litany of other workouts that a lender is willing to negotiate. Short sale, short refinance, loan modification, deed-in-lieu of foreclosure and forbearance are all common loss mitigation programs that have their own pros and cons. It’s about your ability to pay.

Your finances are going to be front and center in any potential loan workout. The lender wants to know where every penny is coming from and where it’s going to end up. If they are to offer a workout for your situation, they want to be sure it’s a worthy investment. There are some things you may want to cut out from your monthly bills:

  • Excessive vehicle payments (less car is a good idea)
  • Cell phones
  • Cable TV
  • Restaurants&
  • Inessential purchases

Stick to the necessities. Lenders want to see you making a serious effort to find room to make your monthly mortgage payment.

It’s about where you live

In places where it’s harder to sell homes on the market (California, Florida, Nevada), chances are better to get a loan workout agreement being reached. Because if a lender ends up with the deed to the home, they have to sell it to recover their investment. If the home can’t sell, they’re stuck. That’s guaranteed incentive to get a solution worked out. Lenders are acutely aware of market activity and will know what is and isn’t working in certain regions.

It’s about your commitment

A situation where you can’t pay your mortgage flat-out is tough. If you can face the fact you need help and reach out for a consultation with a law firm you’ll work something out. If you’re in denial and unwilling to realize that times have changed, you could be in big trouble. Be willing to humble yourself a little bit. A strong commitment to getting things fixed will go a long ways toward getting you back on track.

Every mortgage lender has a loss mitigation department. If you so choose, you may contact them and directly negotiate a program to save your home. That being the case, why should you use a professional loss mitigation professional? Here are four reasons that show why doing it on your own is not worth the risk.

  • Each lender has different policies and approaches – Some lenders will work with you, some won’t. The process with one lender can be very different from the next. Perhaps you think you understand everything you need to do, only to find out that your specific lender has different guidelines. What happens when you take the wrong actions? It could cost you your chance at successfully negotiating new loan terms.
  • Lenders are not going to make this easy – A lender is already leery of your ability to pay your mortgage because you have missed payments. They are going to be detail-oriented when considering your application for a loan modification and will want hard proof that you will be able to handle the new terms. In other words, you’ll need to dot each ‘I’ and cross every ‘T’. Modification companies have developed forms that make sure to cover every part of the process and not miss a single thing. Can you say that in conducting your own negotiations that you are confident you have done everything the lender requires?
  • The negotiation takes some expertise – We all have our niches of expertise and loan modification is no different. There are subtle tricks and issues that can have a huge effect on your loss mitigation success. Having worked with lenders, law firms who specialize in this work aren’t going to get tripped up by a lender during the process. The law firm will smoothly maneuver through the process and avoid critical mistakes that could cost you dearly.
  • Time is critical and none of us have enough to spare – Between work, family and social responsibilities do you have the time required to accomplish a loan modification? There’s no getting around it, you will have to spend long hours figuring out your financial picture and discussing your situation with your lender.
Anywhere from 10 days to several months. This depends on the stage of delinquency you are in and your financial position. Typically it takes 30 – 90 days to obtain a resolution. Here is what we have seen for time frames to give you a better idea.

  • Securing help – Immediately, but it’s up to you.
  • Getting a full loan modification package submitted – 1- 2 days if you are proactive about getting everything done quickly.
  • Internal auditing and underwriting of the file – 24-72 hours.
  • Submit file to be assigned to a mitigation specialist with your lender – 3-14 days depending on the lender.
  • Mitigation process and getting a decision back – Typically 30 – 60 days, but it depends on the lender and can take longer or shorter than the typical time.
  • Making the newly modified loan official – 1-7 days depending on how quickly you return your signed agreements.
  No. Modification companies specialize in out-of-court resolutions of government and non-government mortgage delinquencies or home foreclosure claims for homeowners. These can be FHA, Rural Administration, VA, Freddie Mac, Fannie Mae, or conventional loans which have become delinquent.
How long do I have to act?  Time is of the essence when you are behind on house payments. Each day that passes makes it that much harder to get a work out agreement with your lender that you can live with. The home foreclosure process can take anywhere from a few weeks to many months, depending on your state law and the method of foreclosure your lender chooses to use.
As long as you still own your home you can try for a modification. You can be 30 days, 60 days, even 90 days late on your mortgage and there’s still time to get a loan modification. Too often, someone gets behind and thinks they are completely out of options. It doesn’t help that there are companies telling these people to simply walk away as if nothing can be done.
 Yes. But the law firm cannot negotiate a work out agreement with your lender until your mortgage has been discharged or dismissed from the bankruptcy proceedings. A loss mitigation consultant can still evaluate your case and explain the best options to save your home. Then when the mortgage is out of the bankruptcy they can proceed with the home foreclosure help. Sometimes after bankruptcy it is easier to make a mortgage payment because other debts have been discharged.

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