Loan Modification

What is the difference between a loan modification and a forbearance agreement?

A loan modification is a permanent change in one or more terms of a borrower’s home loan, allows the loan to be reinstated, and results in a payment the homeowner can afford. A forbearance agreement is a temporary solution where the lender agrees to do or not do something that they are legally entitled to do. Examples are no payments made for six months, accepting interest-only payments for a period of time or the lender agreeing not to foreclose while the borrower attempts to sell the home.

Can the lender include late charges in the Loan Modification?

The federal plan under the Obama Administration, Making Home Affordable, mandates that the bank waive any administrative charges, late fees and penalties when offering a loan workout.

How will the Making Home Affordable Plan help me get a loan modification?

This plan allocates $75 billion dollars and this money is used to subsidize lenders and loan servicers that agree to offer loan modifications to their clients. Thus, it gives lenders a financial incentive to help to qualified borrowers. In addition, homeowners who pay their new modified payments on time may be eligible up to $5000 credit to their loan balance.

How do I know if I will qualify for a loan modification?

You don’t! There is no guarantee that the bank will modify your loan and anyone that tells you they guarantee results are lying! However, the primary criteria your lender will look at will be your ability to pay new modified payment. If you provide proof of income, expenses and proof that whatever hardship you encountered has been addressed (you either have increased your income or reduced your expenses), then you stand a very good chance of having your loan modified.

Do I have to be currently delinquent on my payments to get a loan modification?

Under the Making Home Affordable Modification Plan, the federal government will pay lenders an extra bonus for reaching out to those homeowners that are current, but at risk of becoming delinquent in the future. This will help stabilize our economy as borrowers are given assistance before they default on their loans, hopefully preventing future foreclosures.

What is an acceptable Hardship situation?

There is no one answer. Contact a qualified bankruptcy lawyer for further assistance. Because every person is unique, each homeowner has a unique set of circumstances. Generally, lenders consider divorce, marital separation, loss of employment, the death of spouse, co-borrower or family member, illness, job relocation, and/or military service to be acceptable reasons to consider a loan modification. By including a serious, detailed hardship letter as part of your modification application, the lender is given the documentation necessary to learn about your specific circumstances.

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