A Loan Modification is an important part of the Foreclosure Defense Process and is the preferred option for those seeking to keep their home. Loan Modifications typically involve the bank modifying an existing loan in response to a borrower’s long-term inability to make the payments. Loan modifications typically involve a reduction in the principal balance, interest rate and/or an extension of the length of the term of the loan.
A lender might be open to modifying a loan because the cost of doing so is less than the cost of Default or Foreclosure.
A loan modification agreement is different from a forbearance agreement. A forbearance agreement is a repayment plan and provides short-term relief for borrowers who have temporary financial problems, while a loan modification agreement is a long-term solution for borrowers who will never be able to repay an existing loan, by permanently modifying the terms and conditions of the loan.
The Federal Government has created a foreclosure prevention plan designed to help 7 to 9 million homeowners with mortgage difficulties. The plan has three main components:
- A Refinancing Program for borrowers who are current on their mortgage payments but who have been unable to refinance because the value of their home has declined. This program applies to loans owned or guaranteed by Fannie Mae and Freddie Mac. The maximum loan to value on a new mortgage is 105%.
- A Mortgage Modification Program for borrowers in default, or at imminent risk of default, that builds on the model established by the FDIC by expanding eligibility and modifying the loan by reducing the interest rate, increasing the term and/or deferring/reducing principal payments.
- Initiatives to Bolster Fannie Mae and Freddie Mac, by increasing Treasury’s purchases of Fannie and Freddie debt.
Home foreclosure in America today is at an all-time high and is affecting many homeowners that never believed they could lose their home to foreclosure. Homeowners are feeling the crunch of higher interest rates and a slowing economy. A Loan Modification may be the only way for a homeowner to save the biggest investment of their life, their home. Negotiating with the bank for a modification of your home loan can be an overwhelming process for many homeowners, which is why retaining the services of a real estate attorney rather than a loan modification company should produce a better result.
Call our Loan Modification Experts at (949) 891-7799 or (949) 454-1774 or to get started. We can help you work through a loan modification or pursue other options.
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