loan-modification
Loan modification is a program that allows the homeowners and lenders to change the terms of a loan and work out an easier payment plan. This will allow the borrower to avoid a possible foreclosure due to non payments.
A loan modification is not a new loan. It is the renegotiation or restructuring of your existing mortgage note.
Loan modification program is good for homeowners who have got behind in their mortgage payments, people having low credit scores, or those who don’t have enough equity to refinance; a loan modification is often the only option available because they are unable to get approved for a mortgage refinance or a short refinance.
There are several ways of getting a loan modification done. It can be done by one or a combination of all the factors given below
1) The loan’s interest rate may be decreased.
2) The interest rate could be changed from an adjustable to a fixed interest rate.
3) The period of time the loan has to be paid back can be extended.
4) The type of the loan can be changed altogether.
Nowadays, many borrowers are facing foreclosures because of the excessive increase in the mortgage interest rate. Therefore, a loan modification program is the best choice for the borrower as well as the lender to avoid the cost and hassle of the foreclosure process.
Remember the lenders point of view. No matter whom the investor is, the servicing firm is obligated to find a solution to payment problems that will minimize loss to the lender / investor. If the lowest cost-solution is a loan modification, then you will be granted a loan modification. But if a foreclosure will generate a lower costs for the lender, then they will decide to foreclose the home. The cost of the foreclosure to the borrower does not enter into the decision.
Lenders protect themselves from mass loan modifications by entertaining modification proposals on a case-by-case basis, while placing the burden of proof on the borrower. Borrowers must accept the burden of proof.
In most cases, the decision on a modification is not made by the investor that owns the loan. It is made by a firm servicing the loan under contract to the investor/lender. The owner of the mortgage note could be a single lender, or it could be a group of investors who own pieces of a mortgage-backed security collateralized by a pool of loans.
Loan modifications must be handled by a special group of loss mitigation personnel who are more highly trained and better paid, and the increased cost of expanding their number cuts into the bottom line. Therefore, lenders have a tendency to be non-responsive in the hope that borrower will go away.
Recent Comments