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| 10 Frequently Asked Questions on Loan Modifications |
By:
Alex Blue |
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10 Frequently Asked Questions on Loan Modifications
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Q) Is unemployment considered a hardship?
A) Unemployment is considered a hardship but the lender will also want to make sure that the borrower will be able to make the modified payments. While social security and other payments can be factored toward the monthly payment, there is such a thing as too much hardship. If the homeowner cannot make his monthly payments as a result of becoming unemployed, the loan modification will probably be denied.
Q) What if I have a bad credit score?
A) Loan modifications do not rely on credit scores to determine eligibility. The lender’s highest priority is to be sure that the borrower can make the new monthly payments. If the low credit score is due to excessive unsecured debt the mortgage lender may ask for that debt to be settled for the loan modification to be approved.
Q) What if I have received a Notice of Default?
A) In most cases, an attorney can get the foreclosure process stopped as the negotiations on your loan modification are started. In most states, if you have received an NOD (notice of default) there is still plenty of time to achieve a loan modification before the Trustee Sale date if you qualify.
Q) I took out a second mortgage 8 months ago. Can I modify my first mortgage?
A) Yes. As a rule, most lenders require 6 months seasoning between taking a second mortgage and applying for a loan modification.
Q) Can I modify a loan on an investment property?
A) Yes. Most lenders will accept loan modifications on investment properties. However, a loan modification under Obama’s Home owner Relief Plan does not include non-owner occupied properties.
Q) How long does the process take?
A) Due to the sheer volume of loan modifications being done and the back up in lenders loss mitigation departments, the process with an attorney may take as little as one or as much six months to be completed. Unfortunately, most homeowners do not understand the process is different with various mortgage servicing companies. Based on the servicer, investor and loan modification company the process varies. Additionally, income and asset verification may need to be updated as well, further delaying the process.
Q) If I have equity in my home can I still qualify for a loan modification?
A) It depends on the amount of equity in the home. Too much, and you probably won’t qualify unless you have had an extreme hardship and are unable to refinance. If you have equity but have been turned down for a re-finance you could very well qualify for a loan modification if you have an attorney representing you with lender relationships.
Q) Can I get a principle reduction?
A) Principle reductions occur in only about 5% of completed loan modifications. It is possible that principle reductions could become somewhat more frequent under the formulas set forth under the Obama administration’s new loan modification program. We have seen principal reductions from investors when not expected and in extreme hardships.
Q) How will Obama’s loan modification program help me?
A) The program will be initiated with FNMA and FHLMC and then spread out to other lenders. There are caps on mortgage payments relative to a borrower’s income and forbearance options which can push accrued, unpaid balances to the back end of the loan. The rollout will take time so if you are in jeopardy, act now to start your loan modification process. It is also important to understand that the lenders are being encouraged to participate but are not required to do so. The exception is that banks which have received bailout funds are required to participate.
Q) If my loan modification is denied, is a short sale my next best option?
A) Each homeowner’s situation is different but short sales are normally considered to be the next option after a loan modification. If the home is in foreclosure a postponement of the trustee sale may allow the time necessary to facilitate a short sale or short refi if you are found to be a good credit risk.
Visit us at http://www.feldmanlawcenter.com or call 800-588-0425 |
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