Loan Modifications
A Loan Modification is a permanent change in one or more of the terms of a loan allowing the loan to be reinstated resulting in a lower payment that the borrower can afford. In most cases a homeowner in need for mortgage help will indeed qualify for a loan modification. See if you Qualify - Apply Now.

To ensure that you understand what a loan modification will actually do for you, consider the following facts:

A loan modification is indicated when the original loan that is secured by a residence has terms that make it impossible for the homeowner to continue making the payments, thus risking the loss of the residence.

Loan modifications are not the same as debt consolidations, refinancing loans, or even forbearances. Instead, they are long term solutions for rising interest rates or other hardships that are threatening to overwhelm the budget of a homeowner. Loan modifications stop foreclosure proceedings and instead reinstate the loans as they are being modified. There are some other facts that explain why lenders are actually in favor of working with borrowers and their legal specialists in order to negotiate equitable loan modifications.

All or portion of the outstanding principal and interest, past due escrow, late fees, and even costs may be rolled into the loan modification and thus will not be lost revenue to the lender. Since they are spread over a long period of time, they do not pose a problem to the borrower.

Modified mortgages may use a step rate approach or an extended term methodology to provide for the repayment of the due and past due funds. The lower payments ensure the repayment by the borrower while to the lender the added time is actually money in the bank in terms of yet to be earned interest due.

Foreclosure is avoided and even though banks routinely foreclose on properties and sell the homes to other buyers for a fraction of a price, the slowing housing market has made it difficult for banks to unload such properties and then recover any additional funds from the previous homeowners. Loan modification is a fiscally much more attractive solution for any lender. A modified loan protects the credit rating of a borrower and it also helps lenders in showing less defaulting loans in their portfolio. This of course makes a good impression when the financial institution is wooing potential investors. If you think you qualify, Act Now!

The Loan Modification Act of 2008

The Loan Modification Act of 2008 was passed by Congress to give homeowners who find themselves in default, foreclosure, or facing other financial difficulties, the means to have their loans reevaluated and rewritten to make them more affordable and easier to repay.

The need for a more updated loan modification program stems from mortgage excesses over the past few years. With so many homeowners facing bankruptcy and foreclosure, certain members of Congress saw the need to shore up the home loan and housing markets.

The mortgage meltdown presented a negative impact on the economy, the country, and the many homeowners, banks, and mortgage companies that were caught up in the greed and excesses of the time.

This Loan Modification Act sets standards for a qualified loan modification or workout plan on residential home loans and takes into consideration those who might benefit from changes to their mortgage contract and it weeds out those who are not financially able to maintain a mortgage payment, even if it is rewritten under more favorable terms.

What is a loan modification plan and agreement? It is a set of permanent changes to a current mortgage that makes the repay contract more borrower friendly, thereby making the loan payments somewhat less by lowering the current interest rate, giving fixed rate terms, and reinstatment if the loan is in default. It helps the borrower by modifying one or more of the set terms that were present in the contract when the loan was first underwritten, approved, and funded.

The resulting changes are implemented to make the loan more affordable for the borrower by reducing the interest rate and/or rewriting the loan so it becomes fixed. If the borrower is in default, it allows the loan to be reinstated, making the arrearages a source for a new second trust deed that is amortized over a certain period of time in which the borrower pays the balance back in small monthly installments that are affordable.

The Loan Modification Act of 2008 grants a safety net for holders of mortgages who enter into loan modifications or workout agreements with troubled borrowers and clarifies the responsibilities of and provides protection from legal liability for mortgage servicers who help troubled borrowers remain in their homes.

There are a number of criteria that must be met before a qualified loan modification or workout plan is implemented.

  • The Loan Modification Act prohibits the causing of a negative amortization of the loan.
  • It prohibits the requiring of the borrower to pay additional points or fees.
  • It must improve the ability of the borrower to avoid foreclosure.
  • The agreement must also provide a regular scheduled payment that is reasonable for that borrower.
  • If you are under the threat of foreclosure or bankruptcy, you have to understand that it is a very serious matter. It may be a good idea to enlist the help of an attorney who is experienced in loan modification.

Legal Disclaimer:  The information contained within this website is intended for general information and advertising purposes only and is not intended to convey a legal opinion nor legal advice for any particular case or situation.  Nothing within this website shall be considered to establish an attorney client relationship nor to be conveyed as a guarantee.  Help Me Modify, Inc. is neither a law firm nor a lawyer, and does not provide legal service, foreclosure consultation or legal advise.  This is a Communication and an advertisement.
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