Sundeck Mortgage - Loan Modification FAQ

FAQ's

1) What is a loan modification?
A loan modification is a process where the original terms of a mortgage are modified, giving the homeowner new payment terms that they can handle. It will usually involve:

a lower interest rate

extension of the term

adding missed payments to the end of the loan

reduction in principle

or a combination of these.

2) How is loan modification different from refinance?
In the current credit environment refinancing is extremely difficult and time-consuming. Typically homeowner must prove that they have:

excellent credit

job security

disposable income after the bills are paid

and capable of paying a large mortgage.

Wall Street is no longer purchasing loans from banks; therefore lenders have to cut programs for less qualified borrowers. Homeowners that have fallen behind on their mortgage, or who owe more than their house is worth face an even more difficult time trying to refinance. Quite simply, a loan modification may be the only option for a great number of homeowners, particularly in this type of credit market.

3) How do you qualify for a loan modification?
Homeowners with adjustable rate mortgage and loan with high interest rate have higher chance of qualifying. Another important element is that you need to be experiencing some kind of hardship. You will need to present the lender with the reason as to why you can’t afford your current payment, but also explain that you can afford a new payment plan if one were granted.

4) Why will a bank modify my loan?
A bank must believe that it will be in their best interest, as it does leave them with a loss of thousands of dollars. In general they need to know that the homeowner will be able to make payments if the terms are re-negotiated. With the current state of the housing market, the lender could face a loss closer to the millions if they are unable to work out a loan modification. When a borrower is no longer able to make their payments the loan becomes what is called a nonperforming asset, as the loan is no longer bringing money to the bank. Turning the non-performing asset into a performing asset is a matter of income; if a loan modification is possible a bank wants to be certain that following the modification the loan will remain a performing asset.

5) Why should you work with a professional?
While it is possible for a homeowner to perform all the steps required in modifying a loan, it is highly recommended that you work with a qualified professional. In short, loan modification is a very complicated process where all the required steps must be taken strictly as stipulated. Working with a qualified professional will solve all the headaches associated with loan modification.

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