Insider Information – On Getting a Successful Loan Modification (Part 1)

In the next couple of days, I will share with you tips that will increase your chances of getting a successful loan modification.

If you are facing foreclosure, there is hope.  Even if you received the foreclosure documents, there is hope.  Yes,a pending foreclosure can be scary, but don’t go it alone and by all means do not do nothing.

If your problem is temporary, you may be able to get a temporary forbearance, a reinstatement, or a repayment plan.

A forbearance is when the lender allows you to suspend or reduce your payment for a specific period of time.  Once that time has been completed, you will be contacted to determine when you will be able to bring the account current.  An important note is that a forbearance is often used in conjunction with a reinstatement because the homeowner knows that he or she will be able to bring the account current because he or she may be waiting on a lump sum.  The lump sum may be from an insurance settlement, tax refund, hiring bonus, or investment.

A repayment plan, on the other hand, is an agreement between the lender and the borrower for the borrower to resume making regular payment and portion of the past due amount.

If the borrower financial problem is long, a mortgage modification may be needed.  An example of long term may be a reduction in income due to reduction in work hours or temporary job loss. 

A loan modification can consist of:

• adding the missed payments to the back of the loan
• adjustment of the interest rate from adjustable to a lower fixed rate
• adjustment of the interest rate from a higher fixed rate to a lower fixed rate
• extending the number of years to repay the loan

Another little known loan modification applies to FHA/VA loans.  If you have this type of loan, you may be eligible to get an interest free loan from the mortgage guarantor to bring the loan current, and the repayment may not start for years to come. 

Tomorrow, we will discuss what is required by the lender to determine if you qualify for a loan modification and tips on how to present the information to increase your odds of getting your loan modification approved.