What exactly is a loan modification?

With millions of homeowners stuck in toxic adjustable rate mortgages (ARMs), and with no way to refinance out of them, loan modifications are the solution to assist struggling borrowers.
A loan modification is when your existing lender modifies your current mortgage in order to work with you and make your mortgage more affordable (e.g. lowering your interest rate, reducing your mortgage loan balance, forgiving past due payments and delinquency fees, extending the term of loan, etc.).
In the past, loan modifications were only accepted when borrowers were already delinquent; but, now we see them being used sometimes before borrowers go delinquent. Loan modifications are one of the best ways for borrowers to keep their homes and avoid foreclosure. 

• A Loan Modification changes the existing mortgage note and gives the client a fresh start in managing their home loan—accounts are brought up to date immediately.
• With a loan modification, you can take the mortgage you now have and lower (or "modify") the interest rate (as low as 4%), reduce the loan balance (to not exceed 80% of the property value), change the loan type (from adjustable to fixed), and/or extend the term of the loan (up to 30 or 40 years) to establish an affordable monthly payment (less than 32% to 38% of your gross monthly income).
• Lenders are willing to negotiate when borrowers are facing financial difficulties and can't obtain other financing alternatives.

The purpose of a modification is to ultimately and significantly lower monthly payments, and results in a payment the homeowner can afford.

Can the lender include any other costs? Appraisal, credit report, title, closing costs, broker fees, etc..

There are usually no costs assigned with a Loan Modification. The banks are modifying loans for no charge. Per HUD, the accrued late charges should also be waived by the lender at the time of the loan workout-this varies depending on the type of loan-but always request a complete breakdown and description of all fees and penalties from your lender.

Who qualifies for a loan modification?

Anyone that is having trouble paying their existing loan is a candidate for loan modification. In today's housing conditions banks are willing to work with mortgage holders that are having trouble paying their mortgage. However, high probability candidates are homeowners currently in an adjustable rate mortgage, have a high interest rate, are upside down on their home, and/or experiencing any kind of hardship.
The number 1 factor in your approval by your lender is your ability to make the new modified payment now and in the future. You need to supply the lender with proof of your income, along with a complete and accurate financial statement detailing your income and expenses to show them that if granted the modification, you will be able to afford the new, lower payment.

Will a loan modification help me stop foreclosure?

Yes, that is the goal. By working with your lender to find a loan workout solution, your loan is brought current and the foreclosure process is halted.

Can I do a loan modification myself?

Yes. A Loan Modification firm will charge you a high fee ($2000-$5000) to submit the documents that you can submit yourself. Banks are willing to help their clients with a Loan Modification without an Attorney. What is important, is you have the CORRECT, BANK APPROVED documents ready for submission, so the bank can efficiently and more effectively review your case.

What should I do to ensure the best loan modification?

Read as much information from all sources that you can find. Then when you are ready to contact your lender, follow our step-by-step workbook.

Please click the following links for additional Frequently Asked Question pages   FAQs 2   I   FAQs 3