Generally, a modification on your mortgage loan is an adjustment to your initial provisions of your loan. This adjustment modifies the conditions of the original loan. It may involve expanding the duration of the contract, reducing the interest rate, or shifting from a flexible interest rate to a fixed-rate loan.
The conditions of the modification are up to the lender and might reflect on what is best for the lender and homeowner. If approved this will result in reduced mortgage expenses for you the homeowner.
Considering the lender’s point of view, it is a perfect step for them, too, since the mortgage procedure is a rather expensive operation, and it’s a win-win for both.
Not everyone unable to afford a mortgage payment will be eligible for a loan modification. Homeowners normally either have to be overdue for around 60 days, or they have to be in immediate default, indicating they’re not overdue yet.
Still, there’s a strong likelihood that they would be. Homeowners do typically have to prove that they have endured a burden or hardship.
It may be due to unemployment, the death of a spouse, injury, or disease that has impaired the capacity to repay the mortgage under the initial loan conditions.
Many lenders and service companies have their loan modification plans, so the adjustments they create for the conditions can be either immediate or permanent.
Many financial providers provide services tailored to support borrowers who might be unable to afford their mortgage repayments, guided by some of the painful lessons experienced by the industry after the 2007-2008 mortgage crisis. In contrast to improvements, certain high-risk borrowers have the option to refinance at a reduced rate at no premium, particularly though they have not experienced hardship.
When your lender or servicer does not have a plan of their own, we will inquire to see if you qualify for any other support or services that will either help to adjust your payment or even refinance.
The federal government had already introduced the Home Affordable Improvement Plan, but it ended at the end of 2016. Fannie Mae and Freddie Mac have a foreclosure-prevention plan named Flex Modification, which came into force on October 1, 2017. Once your mortgage is controlled or backed by either Fannie or Freddie, you might be eligible for this new plan. The Federal Home Affordable Refinancing Plan, called HARP, has helped distressed borrowers refinance a more secure mortgage.
This curriculum is no longer eligible as of December 31, 2018. Fannie Mae’s Strong Loan-to-Value Refinancing Alternative and Freddie Mac’s Improved Relief Refinance has substituted HARP.
A possible drawback of a loan modification: if you want to modify your home loan due to financial difficulties, you may have a notice attached to your credit report that adversely impacts your credit score, but not as much of a devastating impact as that of the effects of a foreclosure.
Another factor to be mindful of is that based on how the loan is modified, the debt period may be prolonged. In some cases resetting the mortgage terms back to 30 years. But for homeowners on the verge of losing their homes, the advantages of a loan modification can greatly outweigh the risks.
Modifying your mortgage can reduce your bills and allow you the flexibility you need to get back on your feet. Ideas below are to make your loan modifying process simpler.
When you start getting behind on your mortgage repayments, contact us for help. It’s much better to figure out an adjustment plan when you had only failed one or two payments compared to when you failed to repay seven or eight payments.
You will have more choices earlier in the cycle if you are looking for support from your lender or a state or federal program. The more you delay, the more constrained the choices become. Getting support early would also indicate that you are operating in good faith and you are trying to convince the bank or the government. If you wait for the bank to come for you, it will seem like you’re attempting to take advantage of the bank by failing to pay for as long as you can.
Have all of your debt paperwork and other personal records prepared. Ensure you know the documents properly so that you can make everyone else comprehend it too. You’ll need to prove that you’ve missed payments to qualify for loan modification services. Unemployment? Carry your papers no matter what they are. The more the bank or government department knows your condition, the simpler it would be to determine an alternative that will fit you.
If the lender does not provide loan modifications, we can look at the different federal and state loan modification programs to see if you qualify.
For more information please complete the form below and one of our Loan Modification specialist will reach out to you shortly