Loan Modifications – A Homeowner Overview

Homeowners across the U.S. are still feeling the crunch from the housing bubble that hit the country earlier this year. As sub-prime mortgages reverted to regular interest rates, a large number of homeowners have found themselves unable to make ends meet, and many have lost their homes to foreclosure. The number of foreclosures peaked in 2007, and according to experts, the situation is yet to stabilize.” – PR Web November 12, 2008

Headlines like the one above dominate the news almost daily. The number of properties going into foreclosure and the number of homeowners whose homes are at risk is staggering. In many cases, a loan modification can save a homeowner from having a foreclosure on their credit and not having to deal with the foreclosure process.



What is a Loan Modification?

A procedure whereby the lender agrees to permanently change the homeowner’s mortgage payment plan due to the hardship of the borrower and results in a payment the borrower can afford. This can include the rate, term and monthly payment amounts. Why would a lender agree to this? Because of the decline in property values many properties do not have any equity left in them. And, due to the increase in property taxes and insurance as well as adjustable rate mortgage resets plus any unexpected hardships a homeowner may encounter, many homeowners can no longer make their monthly mortgage payments.

A loan modification benefits the lenders as they do not have to take back and resell a house with all the foreclosure and holding costs that are incurred. Lenders are in the money business not the real estate business.



Am I a Candidate for a Loan Modification?

Before considering a loan modification, the lenders will evaluate both the homeowner and the property. They will request documents to review that will allow them to determine whether to accept or reject the loan modification. The following outlines what the lender will be asking while reviewing the loan modification package.



Borrower (Homeowner) Profile

1. Does the homeowner have sufficient monthly income to make the monthly mortgage payments after reasonable living expenses?

2. Does the homeowner have assets that can be used to make the mortgage payments? Do liabilities exceed assets?

3. What has happened to cause the homeowner to no longer be able to afford to pay the mortgage? Remember, before being approved for the mortgage you had to prove you could afford to pay the mortgage!

4. Does the homeowner understand there is no guarantee? (However, The Lamar Fedrick Group, Inc will be working diligently on your behalf).

Please contact me for more information.