Loan Modification ~ What is it?

A loan modification is a possibility  when the consumer actually can afford to make a mortgage payment going forward (even if it's not a full mortgage payment). A loan modification involves demonstrating to a lender that a temporary situation such as medical bills or temporary unemployment caused the borrower to fall behind on the payments, but that the situation has been resolved completely, helping to make the borrower eligible for a mortgage rate reduction.

A loan modification typically requires proof that the borrower earns enough household income each month to make a mortgage payment. (Sometimes proof of renting out a room helps.)

Loan Modification is also a great solution for a borrower who wants to stay in their property, but can't afford the payment to adjust upward, or can't quite afford the current mortgage payment. In that situation, a mortgage pay rate reduction will lower the monthly mortgage payment to a manageable amount. Loan Modification is also a solution when the payment has not been made for a while, but the borrower can now afford to start making payments again.

The type of Loan Modification that is most beneficial for a borrower behind on mortgage payments is called a “recapitalization agreement.” A Recapitalization agreement takes all the arrears, interest, fees, and accumulated payments and adds it to the principal of the mortgage loan. The result of this negotiation is a slightly larger principal loan amount, but a status of “current” on the mortgage loan payments going forward, helping to save the borrower's credit during the process.

As an alternative to a mortgage pay rate reduction, if you are unable to make payments at the current rate, we can often negotiate with your lender to extend your loan for a longer period of time, modifying the loan amount to a more affordable level.

A Loan Modification will help you stay in your home and afford your payments. We've seen lenders accept a lower loan amount to make payments affordable, as well as reducing the interest rate severely to make payments affordable.

Call Chuck, our loan modification specialist today!

831-625-3939

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