The HUD website defines a Loan Modification as a permanent change in one or more of your mortgage terms. The goal of a loan modification is a more affordable monthly home payment for you and your family.

Not everybody is eligible for a loan modification. This article will give you a better idea of what a loan modification is and if you may be eligible. Or, contact us directly. FREDERICK DAVID & ASSOCIATES will be glad to review your case to determine if a loan modification is a good option for you.

Loan Modification Important Facts

• A loan modification is a good option when your original loan has terms that make it impossible for you to continue making the payments, which puts you at risk of losing your home.
• Keep in mind that a loan modification is not the same as debt consolidation, refinancing, or even forbearance. A loan modification is a long-term solution for rising interest rates or other hardships that are threatening to overwhelm the homeowner’s well-being.
• Starting the loan modification begins the process of reinstating the loan.

Why Are Lenders Modifying Loans?

Due to the downturn in the economy, banks are foreclosing on millions of homes across the country. Banks are not interested in foreclosing your home; remember they are not in the real estate business. So, each time a bank forecloses on a home, they are writing off huge losses, which puts them in danger of going out of business. Hundreds of large banks found themselves in this position during the last year and as a result went bankrupt.

Instead of taking your home back, banks are now willing to negotiate with homeowners to prevent foreclosure. This is the perfect time to modify your loan. Nobody is sure of how long banks will continue to modify loans. We strongly recommend that you get started now.

Why are Loan Modifications a Win/win Proposition?

• The payments on a modified loan will now allow the borrower to repay the loan at a reduced interest rate. In turn, the lender enjoys “money in the bank” in terms of yet-to-be earned interest due.
• A modified loan protects the borrower’s credit rating.
• Loans with variable interest rate are elegible to be converted into a fixed rate loan, often for the life of the loan.
• Because the home doesn’t go into foreclosure, the bank is able to show less defaulting loans in its portfolio. This is important when the financial institution is seeking investors.

A Good Candidate for a Loan Modification Meets One or More of the Following Criteria:

• You have suffered a verifiable reduction in income, which affects your ability to make your mortgage payment.
• You are currently employed or have another source of a stable and predictable monthly income. Banks want to know that you can afford the new modified terms of the loan.
• The home for which you are seeking to obtain a loan modification must be your primary residence.

Contact us today for more information. Or you can also submit our simple online form to have a FREDERICK DAVID & ASSOCIATES representative contact you.