Here at MortgagesDebt.com we have had numerous people asking What is a Loan Modification and looking for ways to obtain a loan mod. Due to the state of the economy, and with many people being laid off work with their place of employment closing down getting a modification to your loan is a reality.
So…
A Loan Modification is a permanent modification in one or more of the conditions of a mortgage holders loan, and it permits the loan to be reestablished, and results in a payment the mortgagor can afford.
It’s a simple as that in theory, changing the terms to ones that suit your current situation but it also needs to satisfy the bank. If you have a loan for several hundred thousand dollars, they won’t be too happy if you want to pay $10 per week. But on the other hand, banks and mortgage companies are not as threatening and scary as you may think.
They are not in the home repossession business, or the real estate business they are in the business of lending money and getting it back with interest. Taking your home can be hassle to them, they would much rather you just come up with a mutual agreement to repay the loan. Requesting a modification should be your first step when you get in to financial trouble, long before you start to get in debt and get behind in payment.
So go to our Sample Loan Modification Letters for ideas on what to write and say when requesting a modification.
Here’s a few questions and answers from www.hud.gov
Question 1: In utilizing the Loan Modification option to bring an asset up-to-date, can the mortgage holder include all fees and collective advances?
Answer: mortgage holder Letter 2008-21 expresses in part: Legal fees and corresponding foreclosure costs for work actually fulfilled and relevant to the up-to-date default episode might be taken advantage into the modified principal balance.
Question 2: can a mortgagee execute an interior reappraisal of the property if they have concerns about property circumstance?
Answer: Yes, the mortgage holder might impart any revaluation it deems necessary to check that the property has no physical conditions which greatly affect the mortgagor’s continued ability to support the modified mortgage payment.
Question 3: Can a mortgage holder take on late charges in the Loan Modification?
Answer: mortgagee Letter 2008-21 states that accumulated late charges should be dispensed with by the mortgage holder at the time of the Loan Modification.
Question 4: When employing a Loan Modification option, can a mortgage holder take advantage of an escrow advance for Homeowner’s Association fees?
Answer: HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow Duties says: mortgage holders must also escrow finances for those items which, if not paid, would produce liens on the property posed ahead of the FHA-insured mortgage.
Question 5: Is there a new base interest rate which mortgagees May valuate when finishing a Loan Modification?
Answer: Yes, mortgagee Letter 2008-21 says that the new basis interest rate is 200 points above the monthly average yield on U.S. Treasury Securities, aligned to a continuous maturity date of 10 years.
Question 6: Will HUD subordinate a Partial Claim, should a mortgagor afterward’s default and qualify for a Loan Modification?
Answer: If a mortgagor later on defaults and qualifies for a Loan Modification, HUD will associate the Partial Claim.
Question 7: Are mortgage holders required to perform an escrow analysis when completing a Loan Modification?
Answer: Yes, mortgage holders are to execute a retroactive escrow analysis at the time the Loan Modification to ascertain that the delinquent repayments being taken advantage reflect the actual escrow requirements involved for those months capitalized.
Question 8: Is the mortgagor suitable for the forthright premium refund at final payment of a modified loan?
Answer: It depends upon when the ending date occurred. For assets closed:
After July 1, 1991 but before January 1, 2001, the 7-year honorary premium refund schedule established in mortgage holder Letter 1994-1 remains in effect,
On or after January 1, 2001 that are subsequently refinanced, the 5-year repayment agenda shown in the adherence of mortgagee Letter 2000-46 applies, or
On or after December 8, 2004, refunds of upfront MIP are eliminated except, when the mortgagor refinances to another FHA insured mortgage. The refund schedule connected to mortgage holder Letter 2005-03 has been modified to a 3-year period.
Question 9: Can a mortgage holder modify an asset for the Loan Modification option when the mortgagor is laid-off, the spouse is employed, but the partner name is not on the mortgage?
Answer: Dependent upon this situation, the mortgagee should conduct a financial follow-up of the family income and expenses to determine if extra income is adequate to meet the new modified mortgage repayment, but insufficient to pay back the arrears. Once this process has been finished the mortgagee should then confer with their legal counsel to ascertain if the asset is entitled for a Loan Modification since the spouse is not on the original mortgage.
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