Who Qualifies For a Loan Modification?
During these trying times when mortgages, real estate prices and other financial arrangements are completely unstable, many homeowners are asking how they can qualify for a loan modification. Both the FDIC and the federal treasury are strongly supporting loan modifications as a way to keep people in their homes. Lenders don’t want to take back anyone’s home, homeowners obviously want to stay in their homes and the federal government wants what the people and lenders want.
Many people who are trying to keep their homes are asking questions such as: who qualifies for a loan modification? Homeowners throughout California who are trying to stay in their homes are interested in the loan modification process and want to learn more about California loan modifications.
Below are some basic tips on how to recognize whether or not you are eligible for a California loan modification (or loan modification in another state).
Borrowers (those with a mortgage) struggling to stay current on their mortgage payments may be eligible for a loan modification if their income is not sufficient to continue to make their mortgate payments and they are at risk of imminent default. California homeowners may be eligible for a loan modification even if they are not currently behind on payments. Several factors may cause this scenario: loss of income; significant increase in expenses; or an interest rate that will resent to an unaffordable level.
Here are three ways to know if you qualify for a California or federal loan modification:
1).You occupy your house as your primary residence
2).Your monthly mortgage payment is greater than 31% of your monthly gross income
3).Your loan (mortgate) is not large enough to exceed current Fannie Mae and Freddie Mac limits
Loan Modification
10 Frequently Asked Questions on Loan Modifications
Q) Is unemployment considered a hardship?
A) Unemployment is considered a hardship but the lender will also want to make sure that the borrower will be able to make the modified payments. While social security and other payments can be factored toward the monthly payment, there is such a thing as too much hardship. If the homeowner cannot make his monthly payments as a result of becoming unemployed, the loan modification will probably be denied.
Q) What if I have a bad credit score?
A) Loan modifications do not rely on credit scores to determine eligibility. The lender’s highest priority is to be sure that the borrower can make the new monthly payments. If the low credit score is due to excessive unsecured debt the mortgage lender may ask for that debt to be settled for the loan modification to be approved.
Q) What if I have received a Notice of Default?
A) In most cases, an attorney can get the foreclosure process stopped as the negotiations on your loan modification are started. In most states, if you have received an NOD (notice of default) there is still plenty of time to achieve a loan modification before the Trustee Sale date if you qualify.
Q) I took out a second mortgage 8 months ago. Can I modify my first mortgage?
A) Yes. As a rule, most lenders require 6 months seasoning between taking a second mortgage and applying for a loan modification.
Q) Can I modify a loan on an investment property?
A) Yes. Most lenders will accept loan modifications on investment properties. However, a loan modification under Obama’s Home owner Relief Plan does not include non-owner occupied properties.
Loan Paper
Me and My Loan Mod.
March 01, 2009
Peter Shu
Orange County, California — What is a loan modification? How long do they take? Are they guaranteed? These are the questions I intend to answer. As I am sure of it, most homeowner’s are familiar with the current mortgage crisis that has struck the United States. Those very same people have families, or count on the property for rental income. Whatever the case may be, if you are unable to pay your mortgage due to life’s unexpected twists and turns; a loan modification may be able to help you keep your home. First things first, what is a loan modification?
Loan modification – negotiations with your servicer/lender in the areas of and not limited to: reduced monthly payment, reduced monthly interest-rate, recapitalization of arrears and having your loan brought current; thus avoiding foreclosure.
The core requirement of achieving a modification is knowledge of the lender’s guidelines. Who should you trust when it comes to a loan modification? There are dozens of loan modification or “mod shops” as they call themselves. However in order to protect yourself from being preyed upon by opportunists, always use a law firm. A law firm which specializes in modifications will be able to achieve a loan modification more successfully then a traditional modification company. It also ensures that clients of the law firm receive their due diligence since an actual lawyer’s license is on the line. When it comes down to a loan modifications you can expect a completely different type of business. A law firm will have properly filed documentation, as well as in-house lawyers that provide legal counsel to their firm. But back to how long they take:
How Can I Qualify for a Loan Modification?
As many Americans living in California are facing the possibility of falling behind on their mortgage, or even foreclosure, they are looking into how to qualify for a loan modification. California loan modifications can seem like a complex process, and many people either lack the knowledge or instruction to see if they qualify. Loan modifications can save a family a great deal of stress, and a qualified loan modification attorney can keep a family in their house where they belong.Learning to qualify for a loan modification is important, because it may be the only way to stay in your house while you’re facing financial hardship. There are three conditions that usually must be present in order for a loan modification to be possible: there must be a hardship which results in the inability of the homeowner to make the current mortgage payment or the increased payment which will result from an adjusted interest rate.
When someone is assessing whether or not a hardship does exist, they will look for a situation to have changed which caused the income to go down or the expenses to go up. These changes in either the income or expenses (these days usually both) will often cause the homeowner not to have enough income to make the current mortgage payments, or future mortgage payments.
The second condition which usually must exist in order to qualify for a loan modification is that there must not be enough equity remaining to sell the home and to pay off the mortgage without the lender agreeing to take less than is owed. Many lenders want to avoid a short sale, and if you can negotiate with the lender, they would rather do a loan modification than a short sale.
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