Foreclosure Help Blog

Loan Modification Questions and Answers

With the rise in foreclosures, more and more people are looking for solutions to stop the process.  As you search for help you may be thinking about a loan modification and if it is the right option for you.  There can be many pitfalls to the loan modification process; here I will go over some of the most commonly asked questions and answers on the subjects.

What is a Loan Modification?

A loan modification is where the mortgage holder, will adjust the note on your property, hopefully making the payments more convenient and affordable for the homeowners.  Most of the time the interest rate is lowered with a fixed loan program.  Homeowners may find advantages such as conversion of an adjustable loan into a fixed one, leaving you with a lower interest rate.  Loan modification can make they payments of your mortgage lower and possibly help you avoid foreclosure.

How Can I get A loan Modification?

In order to be eligible for a loan modification homeowners need to be 61 days or 3 full payments behind on their loan.  A minimum of 12 months needs to have gone by since the loan was first given.  The loan may not be in foreclosure when executed.  The modified mortgage should stay in the first lien position.

Also, the homeowner should not have another FHA-insured mortgage.  The borrower should be the owner occupant or commit to live in the property as principal residence.  The borrowers should have enough stable income, to keep up with the new payments.  They must prove that they can do so and that they have the income.

What is the Loan Modification Process?

-First the mortgagee will assess the mortgagor/borrowers financial state.
-An escrow analysis will usually be done by the mortgagee to compare if the actual escrow requirements correspond well to the delinquent payments that are being capitalized.
-The mortgagee has to comply with the disclosure laws or notice requirements of the state and federal government, each state law can vary.
-Then they will determine if records are needed to keep the first lien position.
-They will also make sure that the property is in good physical condition; home repair costs may not be included in the mortgage. Any negative physical conditions may impact the mortgagors ability to support financially.  Both the interior and exterior may be inspected.

Can I try and Get a loan modification on my Own?

Experts recommend that you do not try and get one without help.  It is hard to communicate with banks as an individual and to get them to work with you.  Especially when they are flooded with request all day long.  It is better to find some to help negotiate with the bank and get a work out plan or loan modification for you.