Loan Modification Answers
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What is a Loan Modification and other Loan Modification answers
What is a Loan Modification?
According to the Hud website, A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford. We would add that it is accomplished with a refinancing the loans. Which is frequently very difficult because of a negative equity or upside down situation.
What are basic factors to consider?
Does the borrower wish to stay in the home. If you do not wish to stay in the home you may wish to consider other options such as a deed in lieu of foreclosure or a short sale. We would also add sometimes it makes sense to begin negotiations on a loan mod while concurrently listing the home for a short sale. This way the borrower can determine which option is best for them. We suggest a homeowner should conisder how each one of his or her loan workouts options will effect their credit, their tax exposure and their exposure to having to repay the remaining loan balance.
Should you stay current on your payments?
This is a very important question. Some lenders require borrowers to be at least 60 days late and other lenders wish to have the borrowers remain current. Our advice is to remain current with the first loan until you have analyzed all your options. It may not be wise to go into default on the first if you will have trouble reinstating the your loan (if need be). Before you go into default please consider what will happen if you wind up facing a foreclosure. We believe the seller should always consider protecting themselves from the worse case scenario.
What factors do lenders consider when qualifying borrowers for loan mods
Again the lenders have different programs, but, in general the lenders review:
1. Whether your required payments are increasing or will increase;
Also from the Hud Website: