Loan Modification is when the lender agrees to either permanently or temporarily modify the terms of your loan. As a result of creative financing, many homeowners are faced with ARMS, Interest Only loans and high interest rate second mortgages. Because of these creative loan products, chances of DEFAULT can be increased (especially when the terms change). As a result, many lenders are modifying payment terms and interest rates in order to make the loans more affordable.
The process for Loan Modification is not always an easy one. The lender may make you "jump through several hoops" before it agrees or entertains Loan Modification. You must put your request for Loan Modification in writing to your lender.
Currently, lenders are swamped with Loan Modification requests since media outlets have advised homeowners of this option.
Loan Modification may involve signing new documents. The new documents could seek to take away important legal protections. In the event that you are approved for Loan Modification, consider hiring an attorney for a full review and explanation of your Loan Modification terms.
See the news article on Obama’s Making Home Affordable Program
Example of Loan Modification: You have a loan that is $200,000.00 with a 7.7% Adjustable Rate Mortgage. In two months, the ARM will re-set to approximately 9%.You can afford your mortgage at the 7.7% interest rate but cannot afford the mortgage at the 9% interest rate. You call your lender and explain to them the situation you are in. Offer proof as to why you cannot afford the 9% interest rate.Your lender will evaluate your financial situation and decide that you can afford your mortgage at the 7.7% interest rate. Then, your lender will agree to have you execute a new note for 30 years fixed at 7.7% interest. Viola! Your loan was modified.
Stop Foreclosure 