Loan Modification

A loan modification is a program established to assist homeowners by providing a temporary or permanent affordable payment. The underlining factor or qualification, which all lenders must see prior to acceptance of a modification, is a form of hardship. Clients must note that a modification is NOT a refinance of your property. This program is a re-write of your current terms and interest of your current mortgage. This negotiation process is usually handled between the borrower and the lender or a third party affiliate and the lender.

Determining factors that the lender looks for when issuing a modification:

1)     Has a hardship been established?

  • Loss of Employment or income
  • Medical issues that leads to a loss of income
  • Separation of marriage or joint incomes
  • Disability

2)     Mortgage payments increase?

  • Client is an a adjustable rate mortgage ( that has adjusted) and cannot refinance property due to negative equity
  • Client is an a adjustable rate mortgage ( that has adjusted) and cannot obtain an interest rate, through a refinance, that is comparable to the original payment.

3)    How much negative equity is in the property?
4)    Has the client missed a current payment?
5)    Does a household member still have a form of employment?

Why are the note holders, banks, and lenders willing to modify a loan?

The most important point that clients must understanding prior to conducting a modification program is that “the bank has zero sympathy”. With this in mind the modification case that is sent to the bank could possible be stronger and more effective. The bank is in business for one reason and one reason only, which is to “make money”. In the event that the bank will loose on its investment or note that was written, the primary goal of the bank will be to minimize it losses.

Lets review the two options once a property goes into a distress status:

  1. First the bank must establish that a property is in distress and foreclosure is an eminent and looming possibility
  2. Second the bank will assess the client’s financial situation by determining the maximum payment capable of being afforded by the client.
  3. Third the bank will compare the potential loss through foreclosure compared to that of a modification loss.

Example:

  • Property has a $500,000 lien
  • Current Value of the property if $300,000
  • Interest Rate has adjusted to a 7.5%  ( Index at 3.5% + Margin 4% = 7.5% interest rate)
  • ( For simplicity sake to understand interest rates: Index is what the bank paid for the money, margin is what the bank makes on the money, your interest rate is what the bank sells the money to you at)

foreclosure_chart

ModFraud.org wants all Americans to understand that although a modification seems like logical direction for banks to move when a property goes into distress, the process is still a negotiation and the direction of the bank is never solidified. Essentially put it is battle that the client will have to go through with the bank and the process is long and tedious.

When selecting a third party to represent you, ModFraud.org only endorses attorneys ( not modification company’s with attorneys) that have extensive experience in the area of loan modification, real estate law, and bankruptcy law.

We firmly believe that having strong representation, with experience in all facets of law to utilize and remedy the situation, will provide a stronger potential for a positive outcome.

In the event a client has already lost their home due to foreclosure please review the IRS The Mortgage Forgiveness Debt Relief Act of 2007.

ModFraud.org developed by Square M, Inc.