What is loan modification? In its simplest form, loan modification is when your lender modifies the terms of your loan. They can defer amounts that are past due, change the interest rate, even reduce the principal owed.
The most common element being modified at the moment is taking past due payments and putting them ‘on the end’ of the loan, so that you still owe the money, but your loan is considered current. This happened with a friend of mine. She had lost her job, and gotten about 4 months behind in her house payments. When she got back to work, her bank offered her the opportunity to take the 4 months payments, and defer them, which brought her current. Many homeowners are doing this kind of modification on their own.
Why are they doing that? Because they are nice? Of course not! It’s a business decision. They are not in the business of owning real estate, yet they own quite a bit of it and they really don’t want anymore. So if you make enough money to pay a lower mortgage, they lose less money in the long run.
The next element I have seen modified is the interest rate. If your interest rate has adjusted (or is going to soon), lenders are helping people stay in their homes by offering a reduced and fixed interest rate. If your rate was 5 1/2, and has spiked to 8 for example, many lenders are bringing that rate down to 5. Some people I know have been successful at this on their own, by simply calling and asking, but only if they are already behind.
A less common type of modification is to get the amount owed reduced. This I have only seen done by professional loan modification firms. Companies that do this for you.
There is an attorney here in Las Vegas, helping homeowners (and there are many companies – just check the internet). He is asking the bank for a principal reduction to 10% below the current value of the property and 4% – 6% interest rates, fixed. In other words, if you currently owe $300,000, and are paying 8%, but your house is only worth $250,000 – after the modification you are only paying 4% – 6% on a principal balance of $225,000. Of course there are many factors involved in your final outcome – not the least of which is that you have to be able to prove that you can afford the new payment, so that the bank is not wasting their time stalling the inevitable.
Here is the best part! He only charges $1,250 and if he can’t modify your loan, you don’t pay! Oh yeah, did I forget to mention that they do not pull credit? You do not have to have good credit to get the modification. Sometimes you don’t even have to be behind! (depends on the lender)
Think about it. If he reduces your monthly payment by $200 per month, in 7 months, you are ahead – even if he did not reduce your principal! If you are interested, let me know. www.CapeCodAREI.com/contact
What if you just don’t have the $1,250? Drop me a line, let me see if I can help. www.CapeCodAREI.com/contact