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Mortgage Modification - What is it and are there risks involved?

We currently have 2 mortgages which we are having trouble paying. Our lender has suggested we modify the loan because we are in a high interest only mortgage. Are there risks we should look for? Should we seek counsel? Our original loan officer lied on our financial paperwork and we should have never been qualified for this type of loan. We only purchased with an interest only loan to give us time to sell the house we were living in prior to purchasing this home. That house is still on the market and doesn't look like it will sell anytime soon. Any advise will be helpful.

sara's picture
sara | Joined: July 5, 2006 03:16 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi danielle,

I guess you took out the interest-only loan just to get access to funds till you could sell the home. I have to say this but this doesn't seem to be a good decision on your part. It is at times quite difficult to manage two loans on the same house until and unless you have the funds required.

There might be risks involved because I've heard loan modification often increases your monthly payments. So you'd have to talk to your lender and then come to a proper solution. may be he can suggest aletrrnatve solutions like another reapyment plan or a [url=http://www.mortgagefit.com/refinance.html]refinance[/url]. I suggest that you have a stright talk eith your lender and while yuou do so, seek free consultation with the loan consultants in this community.

Take Care

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi danielle,

Welcome to the forum.

You can go for loan modification if it decreases your monthly payments and also your interest. It is meaningless to go for loan modification if the monthly payments and the interest rate increase.

Feel free to ask if you have any further questions.

Best of luck,
Larry.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Is there anyway my lender can reduce the principal balance on a residential property. Property is 4 months default payment. I want to keep it if they lower the principal. I received the ANNUAL REVIEW NOTIFICATION asses value base on county is 370,000, Principal balance of 530,000

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larry2's picture
larry2 | Joined: June 27, 2007 02:50 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Gil,

Have you consulted with your lender and requested him to reduce your loan balance. Although I don't think the lender is going to reduce the principal balance of your mortgage. He may only reduce the interest rate and the monthly payments by modifying your mortgage.

Take some action ASAP otherwise you are going to face foreclosure as you are already 4 months behind on your payments.

Feel free to ask if you have any further questions.

Best of luck,
Larry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I was behind 3 months on my payments and didn't start a foreclosure process but I needed help bad to get caught up and save my home. I called US Mortgage Modification and worked with a rep. named Jeff, he was awesome. Anyways, long story short, he got my mortgage re-instated with no fee to the lender and saved me about 37% on my monthly payments and I even didn't have to make a payment until September of 2008, 45 days later approx. My question is: Do you think I could have done this on my own?? thank you, Michael

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smith.sussane's picture
smith.sussane | Joined: September 18, 2008 09:57 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Mikey B!

Welcome to forums!

You did a good thing by consulting a representative of US Mortgage Modification. They know how to deal with these situations.

Feel free to ask if you have further queries.

Sussane.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have 2 loans with countrywide; the first is about 144,000 at 11% with adj interest rate; the second is 36,000 at 13% fixed rate. Not behind on mort payments but if loan adjusts again afraid wont be able to afford it. Shld do Loan Modification, have poor credit. Will FHA finance me? What are best companies for Loan Modificaitons?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Am about 6 months behind in mortgage; home went into foreclosure on 06 Jan 2009. Need lower monthly payment, have poor credit due to late mort payments, dont want lose home. Is Loan Modification good option? What are reliable companies; non-fradulent?

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

To tnsmith,

As you are not late on payments, you can first try refinancing the mortgage at a lower rate. I think a FHA refinance is possible for you provided if you have a credit score of at least 580. Moreover, you should not have any collections or late payments on your credit report.

To erandjr,

You have mentioned that your property has been foreclosed on 6th January, 2009. If it's already foreclosed and sold in the auction, then you will not be able to save your home by a loan modification.

If you have only received a foreclosure notice from the lender, then you can definitely speak to the lender about a loan modification. To know more about loan modification, check out the following link:
http://www.mortgagefit.com/know-how/loan-modification.html

Thanks

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We are current on our payments, we are only paying interest. (we have a 5 yr ARM fixed, in two years it will become a variable interest loan). We are retiring next year and will not be able to make the payments (not even interest only.) We owe twice what the house is worth now. We asked our mortgage company to modify our loan but they said that at this point we don't qualify. We would like to stay in the house and we could make payments (once retired) if the interest rate is lowered, (even if the principal stays the same). Is there anything that we can do now to prevent ourselves from falling behind on payments next year?

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jenkin7's picture
jenkin7 | Joined: June 4, 2007 11:02 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Guest,

The lender will not modify your loan, unless they are sure that you will be able to make the payments under the modified plan. Since you are going to retire next year, it is likely that the lender will not modify the loan. In that case, the other option you have is to refinance the loan into a lower rate. Considering your impending retirement, it will be difficult for you to qualify for a refinance. If you have good credit score and a good amount of down payment, some lenders may consider offering you a loan.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I have spoken with you previously. I have 2 loans with countrywide now Bank of America; the first is about 144,000 at 11% with adj interest rate; the second is 36,000 at 13% fixed rate. Not behind on mort payments but if loan adjusts again afraid wont be able to afford it. Tried to negotiate with them and they state I am not eligilbe. Have poor credit; Score about 520. Is loan modification and option what companies are not known for SCAMS

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am in the trial stages of a loan modification. My question is a scary thought, for us... My husband and I live in the home. My son abandoned the property 1 year ago, in other words, moved out and totally disregarded us as parents. To put it correct perspective, my son was kicked out and will have nothing to do with us... Will the mortgage modification ask for my son's information too? If so, it will never be possible to obtain it... where does that leave my husband and I?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

To tinsmith,

A loan modification can definitely be an option for you. As your credit score is quite low, chances of a refinance is impossible. In such a situation, you can at least try to lower your monthly payments through loan modification. Interest rates of 11% and 13% are quite high. The current interest rates on home loans are low and it would have much better if you could refinance both the mortgages at current market rate.

As far as the scams are concerned, all I can say is beware of any modification service provider who charges a good amount of fees upfront. Talk with the [url=http://www.mortgagefit.com/loss-mitigation.html]loss mitigation[/url] dept. of the lending company and check out if you qualify for any modification program.

To phyllisg,

Is your son on the loan? If he is not, then the lender will never want to know his information to modify the loan. If he is one of the borrowers on the loan, the lender will ask about his financial condition before approving the loan modification. However, I do not think it is going to create any problem with your loan modification request. If you and your husband are on the loan, your son’s financial information will not be too important. You can explain the scenario to your lender and I believe they will understand your situation.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i'm currently waiting to close on short pay refinance loan. a few months ago my mortgage company sent me a packet for a loan modification which was never returned to them and now my mortgage company told me that i was under a forbearance/ agreement plan that will help me modify my mortgage.
we never agreed to this modification we are waiting for our loan for the short pay off refinance gets undersigned so i called my mortgage company and asked to put me back to my regular payment plan and they agreed to
remove me from the forbearance/ agreement plan but with a warning that a loan modification is an only shot and that if i refuse i will no longer be able to modify in the future. if this true? what is my short pay refinance fails to go through will i be stuck without the opportunity to apply for a modification again? would my only option be to foreclose on my home.
please advice.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

no one will give us a straight answer as to what will happen to our credit and what happens after the end of the trial period....are they decreasing our interest rate, extending the loan out therefore decreasing our payment or what..no one will tell you anything except the sign the paperwork and wait the 3 months of decreased payments with a hit to your credit but that is all...nothing about what will happen after the 3 months :idea:

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jerry's picture
jerry | Joined: October 17, 2005 03:24 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi dr.short,

There is no rule that says you cannot apply for a loan modification if you have turned down a modification offer earlier. However, a lot depends on a particular lender. Some of the lenders are more eager to work with the borrowers and help them with loan modification programs, while others are reluctant to do so. You have mentioned you are about to close on a short [url=http://www.mortgagefit.com/refinance.html]refinance[/url] loan, right? Did you not talk with the lender and get their approval for the short refinance? If you have taken their permission, you should go ahead with the short refinance. If the refinance does not go through successfully, you can always apply for a loan modification for a second time.

Hi Smith,

The lender can modify your loan in several ways. Most of the time, they either reduce the interest rate on the mortgage or extend the term of the loan. But there are various other factors that are taken into account while modifying a loan. Once your modification request is accepted, the lender will offer you a trial modification plan for a short period of time. Once you make you payments satisfactorily as per the trial plan, the lender will offer you a permanent modification plan.

Thanks,

Jerry

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Can a spouses name be removed from the mortgage if a loan modification is filed? It states in the divorce papers that my ex is required to file a qiut claim deed but I also want his name off of the mortgage. I have been approved and I am now in the trial period which will end in Jan. It is my understanding that a new note will be written at that time. I am hoping at the time the note is written that it will not include my ex.This is in the state of Ct.

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christinehynes's picture
christinehynes | Joined: September 5, 2009 11:56 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[url=http://www.mortgagefit.com/know-how/loan-modification.html]Loan modifications[/url] can help you lower your interest rate, monthly payments, change an adjustable rate to a fixed rate and sometimes even lower the principle (although this is fairly rare).

If you are behind on your payments and are placed into a trial loan modification your credit score will take hits from both being behind and not making your full payments to the bank during the trial period. (They count the trial period as you making partial payments, although if you are approved for a permanent modification they will notify the credit agencies).

To keep yourself safe from scam companies do your homework! Check with your state's legal Bar if you are hiring an attorney and make sure they aren't under investigation for unethical practices! In California it is illegal for anyone offering loan mod services to charge upfront fees, including retainers! If your state does not have a law like this just be wary of those trying to charge you upfront!

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I was denied a modification on my [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] due to income. My first mortgage was modified already. I was told my income could not exceed 49% of the total I pay for the two mortgages combined. They used my gross income rather than an adjusted gross income. My issue with this is that I pay for the mandatory health insurance required by the state. My premium for the month is $520.00. Why is that not taken into consideration? My gross less the insurance premiums would put my income well below the 49%, but they said that is not how they determine eligiabilitity for the modification. Do I have any recourse?

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christinehynes's picture
christinehynes | Joined: September 5, 2009 11:56 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

they should take your health premium into account, sounds like you just have to resubmit and keep fighting them. But some banks have their own guidelines and they really can do what they want especially because it is a second. what is the interest rate and program you have, fixed or adjustable.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

what is the max amount of missed payments anyone has had and still managed to get aloan modification?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

To zappa,

It completely depends on your individual lender and your situation. I’ve heard of situations where the lenders allowed loan modification even though the borrower was current on the loan. There have been situations where the borrower failed to make payments for 5-6 months due to financial hardship, yet the lender did not modify his loan. Thus, missing payments does not always mean that your lender will modify your loan. A lot depends on whether your lender is willing to assist you and whether you have sufficient income to qualify for the modification program.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We are trying to do a mod and have sent all paperwork. Just waiting on yes or no now for 2 months. Our first and second is with same bank. We fell behind on our second but have paid every month on First. The bank called our insurance company wanting to pay our insurance on the property.. This is paid in our 1st mortgage monthly and is current.. Why would they do this?

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Guest,

If your property insurance is paid on time, then the lender shouldn't contact your insurance company for the same. You should contact your lender and ask him to explain the reasons for doing so. He will be able to clarify the reasons to you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i am 3 payments behind not able to catch up but i do have contact the mortgage company of the financial situation and has been patient but got a letter to pay my whole sum that i owe in November the 5th of $ 2820 including 84.42 and deliquency related expenses so it can be current

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi estella,

As you've already received the letter from the lender, you should contact the lender once again and negotiate with him so that he offers you a loan modification which will help you in saving the property as well as your credit.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

my question is if the modification does not go through than what happens we have only had our house a year and it is 5 months behind i do not want to loose my home.

should i send small amounts of money to the lender even if it is not the whole amount of my payment

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adonis's picture
adonis | Joined: October 22, 2005 05:04 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Guest,

You can send small amount of money to your lender but it will depend upon him whether or not he will accept the amount. If the lender does not accept your loan modification request, then you may have to sell off the property to pay off the lender.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Is a loan modification considered a refinance. I completed a a loan mod 2 years a go but no longer can afford payments again. i am gonna short sale my home but wondered if my loan would be considered recourse or non recourse in case it went into foreclosure. I am in CA and wanted to know if the banks could get a deficiency judgement against me. Originally both loan were purchase money loans until I completed loan mod on first mortgage.

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi overwelmed,

Loan modification is not considered as a refinance. The lender will offer you a loan modification when you're facing financial hardship and you're unable to pay off the mortgage payments. Refinance, on the other hand, is taking out a new loan to pay off the existing loan.

In CA, if you go for a foreclosure, the lender won't come after you in order to recover the deficient balance resulting from the sale of the property.

Thanks

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