Loan Modification is a transaction in which lender agrees to modify any or some of the terms of the mortgage. This is a process where an existing note is modified, but not canceled. Changes may include: extending the term of the loan, changing the monthly payments, changing the interest rate, etc. It allows the homeowner to stay in their home and avoid foreclosure.
Homeowners can attempt to modify their loan(s) by negotiating directly with their lender, retaining an attorney who specializes in Loan Modification or hiring a Loan Modification Service. There are many Loan Modification scams and extreme caution should be exercised when hiring a service to modify your loan. We feel confident that the local professionals we work with have your best interests at heart. This is not true of all the services who may market to a distressed homeowner. For more information visit the Department of Real Estate website, www.dre.ca.gov
Generally, homeowners do not have to be in default in order to modify their loan. However the banks will typically address the defaulting homeowner before they will work with homeowners who are not in default. The professionals who we work with have had success in expediting this process for homeowners who are not currently defaulting.
Loan modification can occur in many ways, with the ultimate goal being converting your current loan to a fully amortized 30 or 40 year term loan, with features that make the loan tailored to your specific needs and qualifications. Available features or terms of each loan vary by lender and borrower. Frequently banks will offer an interest only feature at a reduced interest rate for a defined period of time. This will significantly decrease the monthly payments over that period. (Example: the banks will change the interest rate on the loan to 3% for a 5 year period, reducing the rate of the loan from 7+ %) and/or, the bank might also choose to lengthen the term of the loan. (Example: The banks will change a 30 year loan to a 40 year loan.) This will also reduce the monthly payments on the loan. Only in very rare cases will most banks reduce the principal of the loan or offer a Short Refinance.
We recommend speaking with an expert or other professional when negotiating with your bank. There are many methods which they have fine tuned to get the best possible results and can save you many hours of stress and confusion when trying to deal with the banks. A good Loan Modification professional has contacts within the Banks which help them to expedite the process. An ethical Loan Modification professional will evaluate your needs and goals and tell you in advance if they think your loan can be modified and your goals attained. These services vary in cost.
To discuss the options and strategies to save your home contact us for a free 45 minute evaluation
