Should I Modify my home loan?
If you are asking that question, then chances are you already know the answer. Everyone’s situation is different, and timing can be crucial in certain circumstances. Understanding what your options are will give you the insight you need as to when it is the right time to request a loan modification. AND NO, you do not have to be delinquent in your payments to make a request. Banks are in the business to earn as much interest as they can from you. While it is harder to get someone to work with you if you have a good mortgage history, it most certainly can be done, especially if you have a fixed rate coming into an adjustable soon.
Right now all major banking intuitions have some form of Home Stabilization mortgages on conforming loan amounts. So if you have a loan $417,000-$475,000 and under, and have made your payments on time for the last 12 months, most banks will allow you to streamline your loan up to 125% of the current market value. This is a straight rate reduction and is intended to help lower your payments. The bank will do an internal property evaluation and credit pull to see if you qualify. September - October are great times to refinance. If this is your situation try talking with your bank to see if you qualify for this type of loan modification first, you might be surprised. If you loan amount is higher than this and ready to adjust, or is a Negative Pay Option ARM, then you absolutely need to modify.
Hiring a Loan Modification company will run you around $2000-$5000 depending on your income. They will do the same thing that a home save advocacy agency will do, The only difference is that they can help adjust the debts to a sellable modification. It still does not guarantee you will be modified or that the banks will not try to place a back second on the home to try to collect interest on the back owed amount. Once these agency have your money and have packaged the loan for a more sellable modification, they are done with you.
If you are in this situation where you need to modify or you will loose your home, we highly suggest filing a Chapter 13 restructure with an attorney and force a modification through the courts.
Working with a Hud approved counseling agency in your state, HUD and NACA
will save you some money and get you in the door, but they will not structure the loan to make the numbers fall in line, they will only take the numbers you provide. There are Do it yourself loan modification systems that are on line that range from $200-$2000 where you can go in and adjust the numbers yourself to give you a better advantage. It is not a bad idea if you want to see just where you stand. They are automated and full of information, but again, are no guarantee.
If you are getting denied for loan modification and are in a situation where you know you just need more time, read the What are the steps in Foreclosure? and
I just need more time to get back on my feet what do I do?
Can I modify my loan even if I am current in my payments?
Yes, it is possible to modify your loan even though you are current on your payments; however it is a little challenging. Most banks do not want to talk to about loan modification unless you are already showing a hardship. This is because they do not want to give up the interest difference a loan modification would cost them. If you have no hardship situation it is more difficult but not entirely impossible.
If you are in a loan that is getting ready to adjust here is a reality check for you. These figures are from companies who research loans for these violations.
All loans prior to January 1st 2007
90%-99% of all pay option ARMS HAVE TIL(truth in Lending) VIOLATIONS
80%-95% of all negative amortization loans HAVE TIL(truth in Lending VIOLATIONS
60%-80% of all 3 year/5 year/ 7year Fixed to Arms HAVE TIL(truth in Lending) VIOLATIONS
30%-60% of all Arm loans HAVE TIL(truth in Lending)
0-10% of all Fixed loans HAVE TIL(truth in Lending)
If you are serious about wanting to modify your loan, and your loan falls into a 60%-99% category, and the payments the loan will adjust to will cause you strife. If you have a hardship that you can easily document it is a good reason to seek loan modification.
We highly recommend you to try. You really have nothing to loose and everything to gain. If you find you are having difficulties with your bank then we recommend you to get some extra help from a Hud approved counseling agency in your state, http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webListAction=search&searchstate=WA or a good advocacy group like NACA
Another useful tool we have found in successful loan modification is a loan audit, where you will be given a complete diagnosis of your loan and any violations it carries from an Attorney support group. Brokers and attorneys can make requests to these companies and they can prove useful in negotiating your loan modification, especially if they are being really difficult. A good attorney can calculate TIL violations themselves. We have found that if you present an audit report along with joining advocate group to help you present your modification, results happen a bit more easily. The process can take up to 60-120 days so be patient.
Understand these audits are tools. If you are in a situation where you are considering a Chapter 13, let your attorney prepare this, it is part of the fees you pay to them, and the Judge is the one who will actually calculate these damages. There have been successful cases where principle reduction has been allowed under certain circumstances. Please see our section on Should I file Bankruptcy? If so which one?
