What You Need To Know About Loan Modifications

What is a Modification?

A Loan Modification is when you reach an agreement between you and your bank or mortgage company to change the original terms of your mortgage—length of loan, amount of new payment, the interest rate, etc. However, even when your mortgage is modified, your monthly payment may NOT be reduced to a more affordable amount for the duration of the loan. Some banks/mortgage companies will only give you a lower payment for a couple of years before it increases again!

When Can A Loan Modification Be An Option?

  1. You are not able to refinance your loan because of too many missed payments
  2. You were unemployed for a period of time, but now have 6 months of work history
  3. You are several months behind on your mortgage payments or likely to fall behind soon

How does a Loan Modification work?

Step #1: Your lender allows you to apply for the Loan Modification.

Step #2: You will send in the following:

  • A Request for Mortgage Assistance Form
  • A complete and signed IRS Form 4506-T or 4506-T EZ
  • Your most recent signed and filed Federal Tax Return
  • Most recent paystubs
  • Bank statements

Step #3: Lender review of Loan Modification Package. The Modification process should only take 2-3 months. Unfortunately, many banks have made getting a Loan Modification far more difficult than it is meant to be. Some banks will only consider borrowers who are two to three months behind on their mortgages, even though Federal guidelines clearly do not require this. Your lender may “lose” your paperwork repeatedly or claim that you never sent in the requested documents. This is to take the equity from your home. While you are applying for a Loan Modification, the Bank is taking YOUR equity. They charge late fees, penalties, interest, and even sometimes their attorney’s fees.

PROS

  • YOU WILL BE ABLE TO REMAIN IN YOUR HOME
  • YOUR LOAN WILL BE REINSTATED

CONS

  • LESS THAN 20% OF LOAN MODIFICATIONS ARE EVER APPROVED
  • IF USING AN ATTORNEY, THIS WILL COST $3000-$6000
  • YOU WILL MOST LIKELY NEVER SEE EQUITY IN YOUR HOME
  • YOU WILL BE MAKING PAYMENTS ON A BAD DEBT
  • YOUR HOME WILL BE WORTH LESS THAN WHAT YOU OWE
  • YOUR MORTGAGE WILL NOW INCLUDE: LATE FEES,PENALTIES, INTEREST and ATTORNEY FEES
  • IF YOU MISS ANY PAYMENTS YOUR LOAN WILL NOT BE REINSTATED DURING TRIAL PERIOD
  • CAN DELAY OTHER POSSIBILITIES TO GET CASH FROM SALE OF PROPERTY

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