What is a loan modification?
A loan modification occurs when a mortgage servicer/lender modifies the existing terms of a loan(s) by either a interest rate reduction, extension of term, forbearance, principal reduction, or a combination for the foregoing.
How do I qualify for a loan modification?
The servicer/lender will need to verify that you have a reasonable hardship for not being able to afford your current mortgage payment. Also, the mortgage servicer/lender will want to ensure you can afford to repay the loan with the new terms/payment by reviewing your current and post-modification debt to income ratios. The mortgage servicer/lender will conduct this analysis from the financial information that is supplied to them in addition to other records that are currently on file.
How long does a loan modification take?
There is no “cookie-cutter” version to a loan modification. A loan modification may be completed within a few weeks to possibly several months. The factors that will determine the timeframe for a modification will depend on who the mortgage servicer is, the delegated authority of the mortgage servicer, if the mortgage servicer is a sub-servicer or master servicer, if there is mortgage insurance and who, and the potential loss severity for the loan(s). These factors can either speed up the process or delay the process.
What is Foreclosure?
Foreclosure is the formal legal process of a lien holder to regain the asset or property that was collateral for a note that a borrower has defaulted on.
What is Loss Mitigation?
Loss Mitigation is a department within a servicer that works with a borrower to reach a workout or solution for a default on a mortgage to minimize the servicer’s potential loss.
Will this affect my credit?
No, a loan modification will not affect your credit rating. Your credit rating will be affected by the number of missed payments you have. This is why it is imperative to start a loan modification as soon as possible to potentially minimize the amount of missed payments.
I hear that other companies claim that I will get to live payment free in the property for several months. Is this true?
Remember, the more missed payments you have, the more damaged your credit rating will become. Additionally, once you start missing payments, the foreclosure process may begin. The time frames for the foreclosure process will vary depending on the state you live in.
Does a loan modification stop the foreclosure process on my property?
No, the foreclosure process will continue until an agreement has been made by the mortgage servicer and yourself. If a foreclosure auction date is set for your property, it may be postponed until a resolution can be made.
Do I have to be behind on my mortgage to start a loan modification?
No, you do not have to be delinquent on your mortgage, but you do have to prove to your lender that you have a verified hardship that is making it difficult for you to pay your mortgage at the current rate. As a result, you will default on the mortgage in the near future if a decrease in your payment is not completed.
What happens to my missed payments?
Those payments are usually added into the principal amount of the loan. Also, all accrued late charges should be waived per HUD by the lender at the time of the modification.
What if I have filed bankruptcy? Can you still help me?
Yes, but the property needs to be discharged from the bankruptcy. Depending if you have filed a Chapter 7 or Chapter 13 Bankruptcy will determine the process and timeframe before we can start negotiating a loan modification with your servicer/lender.
Should I pay upfront fees to a company?
No, DO NOT pay any money directly to a firm. This is usually a sign of a scam and that the firm is just after your advance fee. Usually, they will never return your phone call or even attempt to modify the mortgage. It is alright to place your funds in a Trust Account or Escrow Account. This allows for your money to not be earned by the firm until the firm has performed the services it was contracted to perform. This allows your money to be protected until the firm has performed its contracted services. This protects your money by being held in a neutral third party account that has no interest in the transaction.
When should I start my loan modification?
Time is of the essence. The more time that passes allows for more missed payments which will be affecting your credit. Additionally, you could be getting closer to a foreclosure auction every day. Remember, there is no “cookie cutter” version to a loan modification. It is imperative to begin the process right away.
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