Frequently Asked Questions
Summary: Loan Modification can be a very frustrating process. It is thus very important to understand this process of loan modification and the new Government programs which assist home owners. This article is aimed to answer the common questions asked in this regards.
The process of loan modification can prove to be very confusing and frustrating for many of the distressed homeowners. One needs to get maximum information about the process before contacting the lender. Guidelines and programs are changing and the process is becoming much easier for the home owners.
So as to help you apprehend the process of Loan Modification and to understand what you should expect from it, following are the 6 commonly asked Questions and Answers about Loan Modification.
1. What is Loan Modification?
It is a permanent modification or change in the terms of the borrower's home loan. It results in the reinstatement of the loan so as to make the payment of the loan easier and manageable for the homeowner.
2. Can late charges be included by the lender in the Loan Modification?
As per HUD, the lender should waive all the late charges at the time of Loan Modification. One should always request a complete description and breakdown of all penalties and fees charged by the lender.
3. How can the new Government Program prove to be of help for getting a Loan Modification?
$75 billion have been allocated by the US Government which will help lenders and servicers so as to subsidize their loans to their clients. Banks will also receive monetary incentive if they help qualified borrowers. Those who will pay their modified payments regularly will also be entitled to a $5000 credit in their loan balance.
4. Who is entitled for a Loan Modification?
All lenders will assess the present and future ability of the borrower to pay the new modified payments. One needs to present the lender with the proof of one's income and a complete record of accurate and complete financial statements. If the data one has presented justifies his ability of paying the modified payments, his loan will be modified.
5. Is it necessary to be delinquent currently so as to receive a loan modification?
Most of the lenders are even accepting applications from those homeowners who are not delinquent currently but are able to prove that that they won’t be able to pay the high interest rates and will not be able to afford the loan payments under the present terms. One should contact his/her lender so as to start with the modification process as soon as possible, regardless whether you are delinquent at the moment or not.
6. Can a loan modification help to stop foreclosure?
This is the prime goal of the loan modification which is achieved by negotiating with your lender a solution which will halt the foreclosure process.
