How does a loan modification work?
A Loan Modification is essentially changing the terms of your existing mortgage loan. The borrower and the lender(s) look at the equation from an affordability index. The most recent affordability index from President Obama’s Housing Plan intends to lower the homeowners combined housing debt to income ratio to 31%. For the borrow who wants to stay in their home affordability is the key element.
The bank has many things to consider in modifying each individual loan. The modified loan needs to make economic sense and be a discounted asset instead of a toxic asset on the bank’s balance sheet. There are several investors to whom the bank is accountable. Changing the terms of the loan can be challenging and may put the bank in a difficult situation between the homeowner and the investors to whom the loans have been sold.
Homeowners should be aware of these dynamics and if the homeowner is advocating for themselves they should be prepared to negotiate using the means that would be most effective for their personal situation.
What if I can no longer afford my mortgage payment?
If you are having trouble making payments, the first step is to call your servicer and get on record as being ready to take steps to keep your home. You want to avoid foreclosure if at all possible. Today there is an unprecedented number of options available to you to lower your mortgage payments, both through the private sector and backed by the government. These include refinance, loan modification, temporary forbearance and short refinancing.
What are the outcomes of a loan modification?
Every loan modification is unique and the results can include any combinations of these possible outcomes:
- • Lowering your interest rate
- • Converting an adjustable rate to a fixed rate
- • Making your mortgage current on past due amounts
- • Principal balance reduction
- • Forbearance agreement
- • Extending the length of the loan
What does Loan Resolve do for me?
LoanResolve™ provides technology that empowers homeowners to interface directly with their lenders/servicers and streamline and manage documents online to complete the loan modification process. Our user guide, self help video and detailed loan modification eBook will help you put together a complete loss mitigation package to submit to your lender.
