Posted on: 30th Mar, 2008 07:46pm
If you're delinquent on your mortgage, or if you're in financial hardship which may affect on-time payments, mortgage modification may be worth considering. Loan modification is what borrowers look for when they are facing a long term reduction in income and fail to keep up with their loan payments.
Mortgage modification may include any of the following:
Mortgage modification may include any of the following:
- Reducing your mortgage rate
- Extending the loan term
- Adding missed payments and/or extending the loan term
Mortgage modification risks
If your loan modification program adds missed payments into the loan in order to bring your payments up to date, the mortgage balance will increase. Also, you'll have to pay legal fees which are added to the loan balance. So, your monthly payments are likely to go up depending upon how much you've saved to cover the back payments.
However, the monthly payments can be reduced if the lender agrees to extend the loan term. This is quite common in case of a fixed rate mortgage where the investor to whom your mortgage is sold off will not allow the lender for a rate reduction. But if you're current on the loan and need relief from an ARM, your monthly payments won't be raised. Rather, the mortgage rate will be reset for 5 years (approx.) to the original rate. However, if you are delinquent on an ARM, the interest rate will be reset but depending upon how much you're delinquent, your payments may still go up.
A loan modification program helps modify your mortgage note and avoid foreclosure but does not cancel the note. In case the existing note is cancelled and replaced by a new one, it becomes a mortgage refinance.
However, the monthly payments can be reduced if the lender agrees to extend the loan term. This is quite common in case of a fixed rate mortgage where the investor to whom your mortgage is sold off will not allow the lender for a rate reduction. But if you're current on the loan and need relief from an ARM, your monthly payments won't be raised. Rather, the mortgage rate will be reset for 5 years (approx.) to the original rate. However, if you are delinquent on an ARM, the interest rate will be reset but depending upon how much you're delinquent, your payments may still go up.
A loan modification program helps modify your mortgage note and avoid foreclosure but does not cancel the note. In case the existing note is cancelled and replaced by a new one, it becomes a mortgage refinance.
We currently have 2 mortgages which we are having trouble paying. Our lender has suggested we modify the loan because we are in a high interest only mortgage. Are there risks we should look for? Should we seek counsel? Our original loan officer lied on our financial paperwork and we should have never been qualified for this type of loan. We only purchased with an interest only loan to give us time to sell the house we were living in prior to purchasing this home. That house is still on the market and doesn't look like it will sell anytime soon. Any advise will be helpful.
no one will give us a straight answer as to what will happen to our credit and what happens after the end of the trial period....are they decreasing our interest rate, extending the loan out therefore decreasing our payment or what..no one will tell you anything except the sign the paperwork and wait the 3 months of decreased payments with a hit to your credit but that is all...nothing about what will happen after the 3 months :idea:
hi dr.short,
there is no rule that says you cannot apply for a loan modification if you have turned down a modification offer earlier. however, a lot depends on a particular lender. some of the lenders are more eager to work with the borrowers and help them with loan modification programs, while others are reluctant to do so. you have mentioned you are about to close on a short refinance loan, right? did you not talk with the lender and get their approval for the short refinance? if you have taken their permission, you should go ahead with the short refinance. if the refinance does not go through successfully, you can always apply for a loan modification for a second time.
hi smith,
the lender can modify your loan in several ways. most of the time, they either reduce the interest rate on the mortgage or extend the term of the loan. but there are various other factors that are taken into account while modifying a loan. once your modification request is accepted, the lender will offer you a trial modification plan for a short period of time. once you make you payments satisfactorily as per the trial plan, the lender will offer you a permanent modification plan.
thanks,
jerry
there is no rule that says you cannot apply for a loan modification if you have turned down a modification offer earlier. however, a lot depends on a particular lender. some of the lenders are more eager to work with the borrowers and help them with loan modification programs, while others are reluctant to do so. you have mentioned you are about to close on a short refinance loan, right? did you not talk with the lender and get their approval for the short refinance? if you have taken their permission, you should go ahead with the short refinance. if the refinance does not go through successfully, you can always apply for a loan modification for a second time.
hi smith,
the lender can modify your loan in several ways. most of the time, they either reduce the interest rate on the mortgage or extend the term of the loan. but there are various other factors that are taken into account while modifying a loan. once your modification request is accepted, the lender will offer you a trial modification plan for a short period of time. once you make you payments satisfactorily as per the trial plan, the lender will offer you a permanent modification plan.
thanks,
jerry
Can a spouses name be removed from the mortgage if a loan modification is filed? It states in the divorce papers that my ex is required to file a qiut claim deed but I also want his name off of the mortgage. I have been approved and I am now in the trial period which will end in Jan. It is my understanding that a new note will be written at that time. I am hoping at the time the note is written that it will not include my ex.This is in the state of Ct.
i was denied a modification on my second mortgage due to income. my first mortgage was modified already. i was told my income could not exceed 49% of the total i pay for the two mortgages combined. they used my gross income rather than an adjusted gross income. my issue with this is that i pay for the mandatory health insurance required by the state. my premium for the month is $520.00. why is that not taken into consideration? my gross less the insurance premiums would put my income well below the 49%, but they said that is not how they determine eligiabilitity for the modification. do i have any recourse?
they should take your health premium into account, sounds like you just have to resubmit and keep fighting them. But some banks have their own guidelines and they really can do what they want especially because it is a second. what is the interest rate and program you have, fixed or adjustable.
what is the max amount of missed payments anyone has had and still managed to get aloan modification?
To zappa,
It completely depends on your individual lender and your situation. Ie heard of situations where the lenders allowed loan modification even though the borrower was current on the loan. There have been situations where the borrower failed to make payments for 5-6 months due to financial hardship, yet the lender did not modify his loan. Thus, missing payments does not always mean that your lender will modify your loan. A lot depends on whether your lender is willing to assist you and whether you have sufficient income to qualify for the modification program.
It completely depends on your individual lender and your situation. Ie heard of situations where the lenders allowed loan modification even though the borrower was current on the loan. There have been situations where the borrower failed to make payments for 5-6 months due to financial hardship, yet the lender did not modify his loan. Thus, missing payments does not always mean that your lender will modify your loan. A lot depends on whether your lender is willing to assist you and whether you have sufficient income to qualify for the modification program.
We are trying to do a mod and have sent all paperwork. Just waiting on yes or no now for 2 months. Our first and second is with same bank. We fell behind on our second but have paid every month on First. The bank called our insurance company wanting to pay our insurance on the property.. This is paid in our 1st mortgage monthly and is current.. Why would they do this?
Hi Guest,
If your property insurance is paid on time, then the lender shouldn't contact your insurance company for the same. You should contact your lender and ask him to explain the reasons for doing so. He will be able to clarify the reasons to you.
If your property insurance is paid on time, then the lender shouldn't contact your insurance company for the same. You should contact your lender and ask him to explain the reasons for doing so. He will be able to clarify the reasons to you.
i am 3 payments behind not able to catch up but i do have contact the mortgage company of the financial situation and has been patient but got a letter to pay my whole sum that i owe in November the 5th of $ 2820 including 84.42 and deliquency related expenses so it can be current
Hi estella,
As you've already received the letter from the lender, you should contact the lender once again and negotiate with him so that he offers you a loan modification which will help you in saving the property as well as your credit.
As you've already received the letter from the lender, you should contact the lender once again and negotiate with him so that he offers you a loan modification which will help you in saving the property as well as your credit.
my question is if the modification does not go through than what happens we have only had our house a year and it is 5 months behind i do not want to loose my home.
should i send small amounts of money to the lender even if it is not the whole amount of my payment
should i send small amounts of money to the lender even if it is not the whole amount of my payment
Welcome Guest,
You can send small amount of money to your lender but it will depend upon him whether or not he will accept the amount. If the lender does not accept your loan modification request, then you may have to sell off the property to pay off the lender.
You can send small amount of money to your lender but it will depend upon him whether or not he will accept the amount. If the lender does not accept your loan modification request, then you may have to sell off the property to pay off the lender.
Is a loan modification considered a refinance. I completed a a loan mod 2 years a go but no longer can afford payments again. i am gonna short sale my home but wondered if my loan would be considered recourse or non recourse in case it went into foreclosure. I am in CA and wanted to know if the banks could get a deficiency judgement against me. Originally both loan were purchase money loans until I completed loan mod on first mortgage.