Mortgage Modifications

(My Original Blog Post: http://timemyself.com/time/financial/invest/real-estate/mortgage-modifications/mortgage-modifications/)

Why do lenders do loan modifications?

The easy answer is it can be a win-win situation for the borrower and the lender.  Homeowners get to keep their homes and lenders save on their own investments and will prevent additional costs that would be accumulated by legal and maintenance of foreclosed properties. These can also be referred to as Home loan mortgage modifications. Let's go over some of the things that we know about mortgage modifications:
The mortgage balance after a loan modification could exceed 100% LTV, or it may exceed original loan amount.
Fees accumulated through the service of the loan modification are not supposed to be paid through the modified mortgage.
The modified loans these days must have fixed rates.
The lender will want the modified loan to be in the first lien position.
Monthly payments must be affordable for the borrower.
You must fully reinstated mortgage modifications.
Interest rates are often reduced, or the loan term extended
The lender may decide to re-amortize the total unpaid amount due over the remaining term of the loan
They are likely to add the arrearage to the mortgage balance

There are some basic qualifications:

Lenders often require a minimum of 2 late payments, at least 61 days, and/or 3 full payments due. However, it is not impossible for a mortgagor or borrower to be persistent and possibly change a lender’s mind as long as the requirements below are met. In today's environment with the help of the government you are likely to get a lender to be more flexible even if you aren't behind like this.
It has been said that the origination date must be at least 12 months before application of loan modification.
The property with the mortgage should be the borrower’s primary residence.
You must have the ability to repay this debt.

Here are some benefits:

Borrower Benefits:

1.Often it can save the borrower's home from foreclosure

2.It can be a much faster, and more simple process than refinance

3.Can be more affordable and less fees than a refinance

4.Payments are more affordable for the borrower

5.Terms are changed towards borrower(s)' benefits or ability to pay (such as a change in a lower interest rate)

6.Often it can save the borrower's credit

Here are some Lender Benefits:

1. The lender will have a borrower still making mortgage payments which looks good on their balance sheets.

2. This could save lenders thousands on foreclosures

3. The lender would have fewer delinquencies, or mortgage defaults in their portfolio.

Here are some reasons why you may want a professional loan modification person handle it for you.  I have heard from some people that due to the banks having too many loans to work on, the lender is more likely to work closely or give higher priority to someone that is a broker or a professional as it's more efficient for the lender.   You can save time and money by getting your one chance to do it right with someone that knows what they are doing.  An expert knows how to negotiate on your behalf and what questions to ask the lender and which to expect.  Based on knowledge and experience the experts and expedite or speed up the process.   Many borrowers don't want to have to be stressed out or worry about these things, so let a professional handle this.

Email me ron@minnesotainvestors.com and I'll put you in touch with someone that does these for a living.

If you feel that a short sale would be better for you please visit our Minnesota Short Sale Homes article