Loan Modification Q & A
I Need To Know More About Loan Modifications!
Q: How will a loan modification affect my credit?
A: Having your undesirable home loan modified favorably may actually improve your credit. Remember that you will not be adding any additional debt, just reducing debt on an existing home. Your payments will actually be lower, allowing more cash flow to pay your other bills. During the process, if you choose not to pay your bills, (or if your circumstances make that unavoidable,) the delinquency has its own effect on credit.
Q: Will a loan modification extend my loan, making it start all over again, like with my last refinancing?
A: Under most circumstances, your modified loan will have the same termination date as the original. If your lender cannot sufficiently stay within the HAMP guidelines for reduction of your payment (for instance having to lower the interest rate below 2%), they have two options; to reduce your principal, or to extend the term. Reducing the principal cost them money they do not want to lose, so they may at that point offer to extend the loan. But most of the time, by dropping the interest rate from 6% to around 3%, most mortgage payments will be lowered by $500 or more per month. That is usually enough to stay within the guidelines, and save both the lender and the borrower some money.
Q: If I try to do it on my own and don't get the results I want, can I try again with professional help?
A: No. The HAMP (Home Affordable Modification Program) eligibility requirements clearly state that you only get one opportunity. The thinking is that if you don't get it right the first time, it is likely that another attempt would be a waste of time, so why bother. I personally feel otherwise, but they don't care what I think, so please get it right the first time.
Q: What if I'm already in foreclosure?
A: Any foreclosure action should be temporarily suspended during the trial period, or while borrowers are in negotiations for the modification. In the event that the Home Affordable Modification fails, the foreclosure action may be resumed. The lenders do have a few tricks to promote failed trial periods. (See the first three bullets under "What should I do while I'm waiting?") In spite of what you may have heard, banks that have enough reserves have been sitting on their foreclosures rather than selling in the current market. By waiting until the market turns the bank stands to profit billions of dollars instead of losing them. For lenders it is all about the bottom line. So far, the number of failed trial modifications is staggering. So be sure to make all of your trial payments on time and turn your trial into a permanent loan modification.
Q: How Long Does a Loan Modification Take?
A: Ralph Roberts from Realty Times sums it up nicely. The loan modification process typically takes 30 to 90 days, depending mostly on your lender and your ability to efficiently work through the process with your attorney or other loan modification representative. The more complex your situation or the greater the degree of concessions needed from the investor, the longer the process takes. Borrowers with a lot of collateral issues can see their loans take longer; from as few as 60 days, to as long as 150 days. A professional can often reduce the amount of time required by processing your paperwork efficiently, presenting your application exactly the way the lender wants it, and knowing from past experience what the lender is able and typically willing to agree to.
Q: What should I do while I'm waiting?
A: Again Ralph Roberts from Realty Times and I are in agreement. When your fate is in someone else's hands, 30 to 90 days can seem like an eternity. By doing your part to keep the process on track, remain informed, and explore other options, you not only improve your chances of achieving a positive outcome, but you can also reduce the stress that commonly accompanies the waiting process. For your part, you can continue to make progress on your own by doing the following:
If you would like to do your own loan modification, and would like to be ahead of the game, the information available (Click) here can save you a lot of confusion and the headaches associated with making a mistake.
If you have any questions about loan modification that haven't been addressed on this website, please drop us a note.
To go back to Loan Modification.
If a Loan Modification doesn't look like your solution, go here.