Loan Modification
Banks are reluctant to help people that they think are likely to default on their loans, Again.
Unfortunately, banks are more focused on minimizing their loses, versus helping people save their homes from foreclosure.
However, they will negotiated with a home-owner, if it'll cost them less to negotiate, versus foreclosing then trying to re-sale that property.
Some banks after taking over a distressed property, have even leased-out that property to the same family, perserving their family-life..
However, they will negotiated with a home-owner, if it'll cost them less to negotiate, versus foreclosing then trying to re-sale that property.
Some banks after taking over a distressed property, have even leased-out that property to the same family, perserving their family-life..
The difference between a Modification Agreement and a Repayment Plan
A Modification - takes aim at re-structuring the loan. It's a long-term solution for borrowers who will never be able to keep-up with existing payments.
A modification is a permanent change in one or more of the terms of a loan, it allows the loan to be reinstated, and results in more affordable payment. It typically involves a reduction in the interest rate, an extension of the length of the term, a different type of loan or any combination of the three.
A Forbearance Agreement provides short-term relief for borrowers who have temporary financial problems, helps them catch-up on missed payments, by paying past due amounts in arrears or temporarily boosting monthly payments by a small amount until the missed payments are paid.
For those who want to keep their home: we can facilitate a loan modification. With a loan modification there is a restructuring of the existing loans.
For people who can not afford to keep their home, there's a Deed in Lieu of Foreclosure. A mortgage professional needs to complete the deed in lieu of foreclosure, or the bank can issue a 'Deficiency of Judgment' and it can sit on your credit for 20 years, wages are garnished, etc.
Who Qualifies for a Loan modification?
1. Anyone in an adjustable rate mortgage. If you are in an ARM you have a high
success rate of modification.
2. Anyone with a fixed rate that is 2% above current market rates for 30 or 40 year
fixed mortgages - FHA or conforming.
3. Anyone who has been late within the last 12 months, anyone who is currently
late, or anyone who chooses to be late purposely just to get it done.
What are the interest rates for a modified loan?
- Anywhere from 3.5% to current market rates on fully amortized 30 year fixed mortgages.
What is the turnaround time to complete the Modification?
45 - 60 days
What about pre payment penalties?
- The pre payment penalty does not have to be paid and there's no P/P on the new loan.
There may be a gradual step up program. What that means is; if they have a minimum payment which is at 3%, the bank will give them a fully amortized principal and interest fixed mortgage starting at 3% the first year, maybe the second year will be at 3.5%, maybe the third year it would be at 4% and so on until they reach the rate that it is going to be the fixed rate for the life of the loan.
ELIGIBILITY
· Minimum of 12 months elapsed since loan origination date.
· The mortgagor must be 62 days delinquent (3 full payments due/ unpaid) or more
· Default due to a verifiable loss of income or increase in living expenses.
· The Loan Modification mortgage must remain in first lien position.
· Loan may not be in foreclosure when executed.
· Owner-occupant, committed to occupying property as primary residence.
· Mortgagor has stabilized surplus income sufficient to support the Loan
Modification mortgage.
· Does not have another FHA-insured mortgage.
FACTS
· A permanent change in the interest rate.
· Capitalization of delinquent principal, interest, or escrow items.
· Possible extension of loan term.
· Use of any three of the above items will result in the re-amortization of the loan.
· Max interest rate adjustment: current market rate plus 150 basis points: Note:
may be below market at mortgagee's discretion.
· All or a portion of the PITI arrearage may be capitalized to the mortgage balance.
· Foreclosure costs, late fees and other expenses may not be capitalized.
· Mortgagees may collect legal and administrative fees (resulting from the
canceled foreclosure action
· No administrative fees for completing the Loan Modification documents can be
passed on to the mortgagor.
· The modified principal balance may exceed the principal balance at origination.
· The modified principal balance may exceed 100% loan-to-value.
· May re-amortize the total amount due over the term of the mortgage, or may
extend the term not more than 10 years beyond the original maturity date
· All Loan Modifications must result in a fixed rate loan.
· The Loan Modification must fully reinstate the loan.
A Modification - takes aim at re-structuring the loan. It's a long-term solution for borrowers who will never be able to keep-up with existing payments.
A modification is a permanent change in one or more of the terms of a loan, it allows the loan to be reinstated, and results in more affordable payment. It typically involves a reduction in the interest rate, an extension of the length of the term, a different type of loan or any combination of the three.
A Forbearance Agreement provides short-term relief for borrowers who have temporary financial problems, helps them catch-up on missed payments, by paying past due amounts in arrears or temporarily boosting monthly payments by a small amount until the missed payments are paid.
Unfortunately, Investment Properties do Not receive a lifeline
There are basically (2) types of mitigation: For those who want to keep their home: we can facilitate a loan modification. With a loan modification there is a restructuring of the existing loans.
For people who can not afford to keep their home, there's a Deed in Lieu of Foreclosure. A mortgage professional needs to complete the deed in lieu of foreclosure, or the bank can issue a 'Deficiency of Judgment' and it can sit on your credit for 20 years, wages are garnished, etc.
Who Qualifies for a Loan modification?
1. Anyone in an adjustable rate mortgage. If you are in an ARM you have a high
success rate of modification.
2. Anyone with a fixed rate that is 2% above current market rates for 30 or 40 year
fixed mortgages - FHA or conforming.
3. Anyone who has been late within the last 12 months, anyone who is currently
late, or anyone who chooses to be late purposely just to get it done.
We'll perform forensics on each file submitted to us, especially the HUD1, the note, and the loan application, scrubbing them for violations, underwriting, mistakes, or lapses of judgment.
What are the interest rates for a modified loan?
- Anywhere from 3.5% to current market rates on fully amortized 30 year fixed mortgages.
What is the turnaround time to complete the Modification?
45 - 60 days
What about pre payment penalties?
- The pre payment penalty does not have to be paid and there's no P/P on the new loan.
There may be a gradual step up program. What that means is; if they have a minimum payment which is at 3%, the bank will give them a fully amortized principal and interest fixed mortgage starting at 3% the first year, maybe the second year will be at 3.5%, maybe the third year it would be at 4% and so on until they reach the rate that it is going to be the fixed rate for the life of the loan.
ELIGIBILITY
· Minimum of 12 months elapsed since loan origination date.
· The mortgagor must be 62 days delinquent (3 full payments due/ unpaid) or more
· Default due to a verifiable loss of income or increase in living expenses.
· The Loan Modification mortgage must remain in first lien position.
· Loan may not be in foreclosure when executed.
· Owner-occupant, committed to occupying property as primary residence.
· Mortgagor has stabilized surplus income sufficient to support the Loan
Modification mortgage.
· Does not have another FHA-insured mortgage.
FACTS
· A permanent change in the interest rate.
· Capitalization of delinquent principal, interest, or escrow items.
· Possible extension of loan term.
· Use of any three of the above items will result in the re-amortization of the loan.
· Max interest rate adjustment: current market rate plus 150 basis points: Note:
may be below market at mortgagee's discretion.
· All or a portion of the PITI arrearage may be capitalized to the mortgage balance.
· Foreclosure costs, late fees and other expenses may not be capitalized.
· Mortgagees may collect legal and administrative fees (resulting from the
canceled foreclosure action
· No administrative fees for completing the Loan Modification documents can be
passed on to the mortgagor.
· The modified principal balance may exceed the principal balance at origination.
· The modified principal balance may exceed 100% loan-to-value.
· May re-amortize the total amount due over the term of the mortgage, or may
extend the term not more than 10 years beyond the original maturity date
· All Loan Modifications must result in a fixed rate loan.
· The Loan Modification must fully reinstate the loan.
Note: After Modification, subsequent defaults are treated as a whole new default
Serving El Paso County
for over 14 years...
Without Professional Help, 8 out of 10 people seeking a modification were denied
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