What Is a Loan Modification?
Simply put a, loan modification restructures your existing loan to reflect new terms such as loan length, interest rate and loan type which you can responsibly afford given your present day financial condition. Today lenders are experiencing an unprecedented high rate of foreclosures which put significant financial pressure on them as a result of these failed loans. In some cases lenders have been forced to file for bankruptcy protection. The immediate future looks worse as hundreds of thousands of loans are due to “reset” or adjust away from the low interests rates of 3 to 5 years ago to much higher rates that the present owners cannot afford to pay. With Federal, state and local government encouragement, many lenders and servicers are now beginning to consider loan modifications as a viable tool to retain some earning potential for the existing loan while at the same time keeping possession of the home in the hands of the consumer. A common misconception is that you must be behind in your payments to be considered for a loan modification. While this was true for the most part, that is not the case now. In fact if you are anticipating a loan reset or if you have had a hardship befall you, the earlier we can work with your lender the better chance you have of resolving the issue while preserving your credit rating. If you are behind in your payments but have not yet received a notice of default placing your property into foreclosure, a common example of a modification might be where delinquent payments are made current by adding them onto the back of the loan. Your loan payments would remain approximately where they were BEFORE the payment rate & payment adjusted up however your loan term is extended out. Another approach we are seeing more and more is for the lender to agree to temporarily (2-3 years) reduce the interest rate allowing you a lower payment in order to catch up the arrearages and maintain your payments in a timely manner.
Simply put a, loan modification restructures your existing loan to reflect new terms such as loan length, interest rate and loan type which you can responsibly afford given your present day financial condition. Today lenders are experiencing an unprecedented high rate of foreclosures which put significant financial pressure on them as a result of these failed loans. In some cases lenders have been forced to file for bankruptcy protection. The immediate future looks worse as hundreds of thousands of loans are due to “reset” or adjust away from the low interests rates of 3 to 5 years ago to much higher rates that the present owners cannot afford to pay. With Federal, state and local government encouragement, many lenders and servicers are now beginning to consider loan modifications as a viable tool to retain some earning potential for the existing loan while at the same time keeping possession of the home in the hands of the consumer. A common misconception is that you must be behind in your payments to be considered for a loan modification. While this was true for the most part, that is not the case now. In fact if you are anticipating a loan reset or if you have had a hardship befall you, the earlier we can work with your lender the better chance you have of resolving the issue while preserving your credit rating. If you are behind in your payments but have not yet received a notice of default placing your property into foreclosure, a common example of a modification might be where delinquent payments are made current by adding them onto the back of the loan. Your loan payments would remain approximately where they were BEFORE the payment rate & payment adjusted up however your loan term is extended out. Another approach we are seeing more and more is for the lender to agree to temporarily (2-3 years) reduce the interest rate allowing you a lower payment in order to catch up the arrearages and maintain your payments in a timely manner.
There are literally thousands of variations as to the types of loan restructuring that we can offer depending on your circumstances. As each lender is different and have varying requirements , and with industry and governmental changes occurring every single day, it is best that you speak with one of our counselors in order to determine which is best for your specific situation. We are able to be in constant contact with your lender and negotiate the best restructured loan possible.
ADVANTAGES OF RESTRUCTURING YOUR LOAN- NO NEW APPRAISAL (IN MOST CASES)
- MINIMAL CREDIT CHECK OR MINIMUM FICO SCORE (in many Cases)
- NO REFINANCING OR CLOSING COSTS
- CURES YOUR PAST DUE STATUS
- PROTECTS YOUR CREDIT RATING
- ONE TIME, FLAT FEE FOR SERVICES
- ALLOWS YOU TO KEEP YOUR HOME EQUITY (if applicable)
- CURRENTLY BEHIND IN MORTGAGE PAYMENT OR CLOSE TO IT
- Documented Proof of your financial condition and your ability to make payments under the new loan structure
- SHORT TERM FINANCIAL DIFFICULTY
- LOW OR NO EQUITY IN YOUR HOME
- Pre-hardship record of good payment history
- Currently in an Adjustable Rate Mortgage ready to reset
- Currently in a high interest rate fixed mortgage
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The most common options for a homeowner falling behind on their mortgage are:
- Loan Modification - A Loan Modification is a negotiation between a lender and a borrower whereas the loan terms are restructured without refinancing. The rate and terms of your loan are restructured to fit your current financial situation. If we are able to qualify you, the lender may allow you to add the delinquent amount owed to the current principal balance owed. They may even lower your rate to help lower the monthly payments to help you avoid default and get your credit status restored with them.
- Forbearance Agreement- With the right situation, we can help you work out a repayment plan with your lender to allow you to cure your delinquent amount over a period of time and reinstating your home loan with a manageable monthly payment.
- Short Sale - Sometimes it is in the best interest of the homeowner to sell their home, whether it is a change in income or lifestyle (newborns, marriages, divorces, etc.) they can no longer afford their mortgage payment. It is never easy just to decide to sell under these types of circumstances, and with the current real estate market situation if you have little or no equity you may end up with a loss on the actual sale of your home. When you owe more than your home is worth a short-sale occurs. Our company will assist you, provided the lender agrees, in the sale of your home under the right circumstances. But the lender would agree to any net proceeds as full payoff. An appraisal is required for a short-sale.
- Deed in Lieu of Foreclosure - If you can no longer afford your mortgage payment and can not qualify for a loan modification, and foreclosure or short-sale are not an option for you, then you may voluntarily give your property rights back to the investor. Normally your lender will demand a walk-through inspection of your property before they will accept a Deed in Lieu of Foreclosure. Additionally, your credit history will still be impacted negatively however in most cases this action is viewed more positively by future creditors when compared to a foreclosure or a bankruptcy filing.
- Reinstatement Plan - Where your lender will reinstate the original terms of your loan once you are caught up.
- Repayment Plan - Where your lender will tack on an extra amount onto each payment for a set period of time.
- Loan Refinance - Refinancing may be an option if you have the equity and credit required.
- Pre-Foreclosure Sale - You agree to sell your property before foreclosure takes place. (requires equity)
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- Consumer Loan Modification will perform a focused and detailed forensic review of your original loan documents, modification documents, and current financial situation. Additionally, we will complete a detailed loan document and disclosure audit, performed by our compliance Attorney. We will focus on potential Truth in Lending Act (TILA) and Real Estate Settlement & Procedures Act (RESPA) violations or inconsistencies. Other items we look for include:
- EXCESSIVE FEES: We look for Excessive Fees and Improper Charges by your Lender. We also look for Deceptive Abusive Predatory Lending Practices, Excessive Prepayment Penalties, Tangible Benefits to the Borrower, Affordability to the Borrower, Home Mortgage Disclosure Act (HMDA) Data, Broker Fee Agreements, and State and Federal Disclosure Accuracy.
- FRAUD AND NEGLIGENT MISREPRESENTATION: Were any representations, statements, or comments, written or oral made by the loan officer, broker, notary or anyone else which contradicted the terms of the documents? When a mortgage professional makes errors which a reasonably diligent mortgage professional would not have made, he or she may have made a negligent misrepresentation.
- CONSTRUCTIVE FRAUD: Material facts include the terms of the loan, whether there is a prepayment penalty, or any other information which a reasonable borrower would want to know before accepting the loan. Did the broker or loan officer or anyone working for the broker or loan officer fail to disclose any material facts to the borrower?
- BREACH OF CONTRACT
The note and its attachments are a contract. The broker must follow all the terms of the contract such as the way the interest is calculated, and the penalties it assesses. Were there any terms in the contract which the lender failed to follow?
If we find irregularities and we determine that you may have been a victim of deceptive lending practices, fraud, predatory lending practices, or any other type of mortgage compliance issues, we will send an official written request to your Lender, on your behalf. We will first attempt to leverage these issues with the lender to make them more receptive to your modification process prior to filing complaint(s) with any agency and inform the Lender of the Issues we have found. Most Lenders will have little choice but to settle immediately, once they review and confirm our findings. In the event, the Lender fails to respond to our official written request within 20 days of our notice or fails to settle within a 60 day time period, we will then refer your case out to our attorney who can file lawsuits with the lender on your behalf. - WE PROVIDE TO YOU
Results report of all factual findings of the forensic audit and all federal law violations Outline of hidden fees and/or commission earned by your broker or lender A complete assessment so you can pursue possible legal claims against your broker and/or lender.
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- CAN I DO THIS MYSELF?
YES, but… statistically, homeowners that try to work directly with their lender have a greater failure rate than when your lender is dealing with an attorney on your behalf. This is a sad commentary but true none the less. We find even attorneys don’t represent themselves.
If the lender forecloses on your home they will be the owner and they will sell your home and pocket your equity (if any). They will use everything you say against you. They will want lots of cash down to do a forbearance payment plan you can’t afford. You lose the cash and your home. We are attorneys and retired bankers and know your rights.
- HOW LONG DOES THE PROCESS TAKE?
There is no exact answer. Generally, you can expect the process to take between three weeks and ninety days to complete depending upon your lender.
- HOW MUCH TIME DO I HAVE BEFORE THEY SELL MY HOME?
Every situation is different, typically in California the entire foreclosure process takes about three months to complete after you receive a Notice of Default. The sooner we start the loan modification process and the more time we have to work, the greater the likelihood of success.
REMEMBER THIS - MAXIMUM SUCCESS IS POSSIBLE WHEN WE RECEIVE THE CLIENT’S INFORMATION 60 DAYS OR SOONER BEFORE THE FILING OF THE NOTICE OF SALE.
- WHAT INFORMATION IS REQUIRED
In order to process your request for a debt restructuring we will need the following documentation:
- Hardship Letter: Your lender wants to understand what the problem was that caused the delinquency, and how you have solved or intend to solve the problem. In other words, tell what caused the problem and why it won’t happen again. It should be a DETAILED letter that we will consider this letter a DRAFT and will help you if necessary.
- Authorization to Represent form(s) for each lender: Be sure to give us complete information about your lender(s). For example, copies of correspondence you received, address, phone number and name of any individual with whom you have discussed this matter.
- Legal Notices: Copies of all legal notices you have received from your lender(s).
- Income and Expense Form: A completed Income and Expense Form (attached).
- Tax Returns: We only need the first page of the last two years of Federal Income Tax returns. If you have not filed for last year, please include a copy of the extension and a brief note explaining why you have not filed.
- Bank Statements: Copies of all bank statements for the last three months.
- Pay Stubs: Copies of your last two paycheck stubs. If you are self-employed include a profit and loss statement for the last six months and bank statements for your business accounts for the last six months. If you have rented a room(s) in your home the lender will require a rental agreement.
- Other Income: Verification of any other source of income. Example: Rental agreements, Social Security benefit statements, and so forth.
- Borrower Financial Statement: A completed Borrower Financial Statement.
- Retainer Agreement: A signed Client Contract.
- List of Creditors: A list of all creditors.
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How to get Started:
Before we can help you we need to carefully understand your financial circumstances to find the best possible solution to your mortgage challenge.
Step One - Fill out our online form, by filling out our complete form you can get a more detailed quote.
Step Two - One of our loss mitigation specialists will go through your options and then have you provide the following information, provided the specialists feels that we can help you.
You will fax the following information to see if you can fully qualify.
Forms provided by us, filled out by you.
- Hardship Letter - this helps us fight for you, explaining your financial hardship situation in detail.
- Letter of Explanation of Income & Financial Worksheet - These forms show all household income and expenses to again help us fight for you and your hardship.
- Loan Modification Worksheet - Personal and property information
- Credit Release Authorization Form - allowing us to research your credit standings
- Modification authorization Form - Allowing us to communicate with your lender on your behalf .
Supporting Documents provided by you
- Copies of most recent payroll stubs - 2 months both borrower and co-borrower, provide what you have if no pay-stubs
- Copies of last 2 years W-2's - again both borrower and co-borrower
- If self-employed, provide copies of Tax Returns for most recent 2 years - all schedules
- Copies of last 3 months bank statements for all bank accounts, all pages. Contact us with any questions.
- Copies of most recent mortgage statements or coupons
- Copies of property taxes and insurance
- Copies of household bills :
- Utilities like - electric, gas, water, etc.
- Insurance for your - car, home, medical, etc.
- Child care, or other outstanding liabilities being paid
- Listing Agreement - only used with "short-sales"
- HUD-1 or Net Agreement - if applicable
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