Hello all: Part of my continuing education the end of last year was to take a class on loan modifications. This is becoming a big business these days. The one thing I always felt was that the consumer needed to be careful about who they signed up with to do a loan modification. In fact, most of the time this can be done directly through the lender. I know this may offend some of you who offer this as a service. I'm sorry and hope that you're working on behalf of your client and not lining your own back pocket!
So here are a few simple tips about loan modifications. Although I have heard of loan modifications being done where the interest rate drops yet the borrower has always made their payments on time, this is the exception to the rule. Generally, loan modifications are being done for people who are behind on their payments. In fact, most lenders will state that they will talk to you when you are delinquent. Now I'm not suggesting that you ruin your credit to do this. Any decision should be made after weighing all sides of the equation.
Here in Washington State, they have mandated that your payment should be no more than 38% of your gross income. This means if you have a loan at a much higher interest rate, you may be able to get it cut almost in half. The terms are usually an adjustable rate (let me know if you hear about modifications for a fixed rate) that goes up every year with a lifetime cap. Suffice it to say it's allowing alot of homeowners in trouble to hang onto their houses.
Yes, the process can take up to 60 days but also can stave off foreclosure and allow you to keep your home. All in all, I think it's a good plan. Remember the lender really doesn't want to have to take your house. They have thousands already! Again, you can often contact the lender directly about your situation; you may be pleasantly surprised what they work out for you. I hope this helps. As always, you're welcome to weigh in with your thoughts. Have a great day!
Paul McFadden
Paul, good information here. I would think if a person has the opportunity to keep their indebtedness clean by doing this modification, then they should go for it. I agree also if they are not past due, don't be and try and do the modification if possible to lower the mortgage interest and payment. I think this is a good post for any Realtor or Lender to read. Good luck.
Paul, I agree with you,modifications are a good idea for borrowers who want to stay where they are and ave fallen on tough times. I read recently however that the statistics do not support the long term benefits to borrowers trying to stem the possibility of losing thier homes. Over 75% of these borrowers end up in foreclosure anyway. So, although they are a great idea in theory. The fact remains, if they are already in trouble, they are in trouble in other parts of their finances as well and a lower housepayment may not be the all to end all. IMHO
Thanks. I hope all is well
Bo
Hey Paul, I recently became affiliated with a loan modification team (lawyer/financial advisor) in WA that starts with realistic household budgets to consult borrowers and negotiate for the real worlds they find themselves in. AND we work with folks not yet in arrears. I dare not advertise ... I am offering to clients who present in distress but otherwise have good habits...and I see this as a tool to serve them, help them get in better shape to avoid worse things like depleting their other assets. The team I am working with has a great track record and the fee is low. I did my homework first. One client is near a result and I have two in train...so far so good! Susan
Susan: Good for you. Keep me posted as to your success.
Bo: Thanks for your kind thoughts! Back at you. I agree with you although I will always hope for the best. Take care.
Bob: I would hope people would read this. It's so easy to panic and think this is the be-all end-all thing to do. As always, it pays to be prudent. Thanks again!