Is Loan Modification Right For You?
Every loan modification is different, and so is every client. At a consultation our first questions is always to ask what exactly you want. What is important to you? Keeping your home for the short term, or long term? Saving your credit? Selling your home with the least amount of financial burden following you? No matter what your goal we can find the solution that fits you best. Sometimes that may not be Loan Modification. A Short Sale or a Bankruptcy may fit your needs better. Sometimes Loan Modifications don’t go the way you hope they do, but that doesn’t mean another option can’t be taken to further reach your goal. Sometimes, Loan Modification is exactly what you need.
Your individual financial situation is looked at in an initial consultation, and this will help you decide if Loan Modification is right for you. Often decreasing your monthly payments to save your home for the next few years, is not financially worth it. While should you choose to remain in your home for awhile, it may be your best option. This is just two scenarios of many to consider before making a decision.
The Loan Modification Process-How does it Work?
Many people are wondering why Loan Modification is suddenly everywhere. Prior to 2008 Lenders were only permitted to modify 5% of their loans. In 2008 this number was increased to 50% in hopes of saving the abundance of people today facing foreclosure.
The process involves a lot of paperwork and negotiation. At Brown, Van Horn, we have a loan modification team. This team works together and collects documents and information from the client to basically create a package to present to the Bank. The package will include items and paperwork that the bank requires, as well as a spreadsheet prepared by our team showing why Loan Modification is in the best interest for the Bank, compared to a Foreclosure or a Bankruptcy. This spreadsheet is created by the team after they do a forensic analysis of all the loan documents, your personal financial situation, and the current conditions of the real estate market.
This team has learned what many different banks are looking for in deciding whether or not to modify your loan, and to what extent it will be modified. Furthermore, our team negotiates directly with the bank on your behalf to attempt for the best modification you can get.
In the negotiations, how the loan is actually modified generally goes in a specific order. First, the loan will generally be spread out to a longer loan term. Then we attempt to decrease the interest rate you currently have. Occasionally, we are able to decrease the actual principle of the loan.
We will never settle for a monthly payment that you are still unable to afford. If this goal is not achievable, we can discuss other options to save your home. At Brown, Van Horn, we will never just leave you high and dry. We can always find other options.
Loan Modification can also be done through Foreclosure Defense Mediation. This provides an opportunity to sit down with the bank and actually discuss terms that you can afford.
Do I Need to be Behind on My Payments?
A Loan Modification can be completed, even if you are up to date on your mortgage. However, for the bank to allow you to modify you have to show that soon you will be unable to pay. You need to show a financial hardship. This is generally discussed in the consultation, because part of the package we represent to the bank includes a hardship letter.
If you are behind on your payments but have yet to receive foreclosure papers, this will generally happen about four months after you default. As soon as you receive foreclosure papers you should bring them to an attorney, because without proper a foreclosure defense your home could potentially be foreclosed on before your loan modification is complete. The banks do not stall foreclosure proceedings while you are attempting to modify. At Brown, Van Horn, as soon as we receive these papers, they are given to the foreclosure defense team to prevent your home from being foreclosed on.
Today, the only people permitted to do Loan Modifications on behalf of another person are attorneys and mortgage brokers. Should you choose to retain a mortgage broker, you may want to also retain an attorney just to defend your foreclosure during the loan modification process. If you have already been served with foreclosure papers you should bring them to an attorney. You only have 20 days from the time you were served until you can submit a response, otherwise the bank can get a default judgment against you, and eventually foreclose on your home.
Whether or not you are in default, or even in foreclosure, a Loan Modification can still be done.
What If I Have More than One Mortgage?
How a Second Mortgage will be effected, can never be known for sure, however, a Second Mortgage can generally follow suit with the First Mortgage. This can happen because the First Mortgage wants to remain first priority, and a Loan Modification creates a new Note, and a new Note would go after the Second Mortgage. Therefore, the first Mortgage will generally buy out the second one, or have their rates go to the same level as the modification. This differs in every situation. At your initial consultation you would want to bring both sets of loan documents so that we can get an idea of what may happen.
Can’t I Modify My Loan by Myself?
Yes, you can modify your loan by yourself and many people are attempting to do that today. However, the advantage of hiring someone else, is that an experienced team knows what the banks are capable of, and what kind of rates they are giving to other borrowers. For example, the bank may insist the interest rate they can offer you is the lowest they are permitted to offer, while our Loan Modification knows that bank has offered lower interest rates to other borrowers. An experienced team also knows what techniques generally work most effective with each bank. Furthermore, you want to make sure any foreclosure proceedings do not end in your home being sold against your will, and you having to pay a deficiency judgment.
Today many loan modifications are being done through Foreclosure Defense mediation.
Whatever your end decision is, make sure it is the one that fits you and your family’s financial needs. Feel free to Contact Us, for a FREE consultation to get an idea of what your best next step should be.