A Loan Modification in comparison to other options can carry much more benefits for the home owner seeking payment relief. Other options with their benefits and disadvantages are:
A Forbearance agreement: A forbearance agreement is an arrangement to postpone a borrowers monthly payment for a limited and specified time period.
Benefit: Payment plan provides short term payment relief
Disadvantages: Daily Accrued interest continues to build and arrears are not forgiven. Home owner will still need to catch-up payments.
A Refinance through a Private Investor (Also, known as a Hard Money loan, or Foreclosure Bailout Loan)
Benefits: Low documentation, and quick processing which can result in closing in as little as 5-10 days. Also bad credit is excepted because the loan is equity based.
Disadvantage: High interest rates ranging from 10-13% on average with some type of prepayment penalty. Also, closing costs which are rolled into the loan can be double traditional amounts because some investors require more prepaid escrows for your taxes and insurance. Also, must owe less than 70% of value
Short Sale: The bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the mortgagor (Home owner). This negotiation is all done through communication with a bank's loss mitigation department. The home owner sells the mortgaged property for less than the outstanding balance of the loan.
Benefits: Debt is paid off and the you are able to save your credit to be able to purchase another home.
Disadvantages: The home owner must vacate the property, and home owner cannot receive any proceeds from the sale (No Money). Must have a prequalified buyer with an offer in order for lender to even consider the possibility of a short sale. The lender can issue a mortgage deficiency for the difference in balance owed and what the property sold for.
For FHA loans: obtain a partial claim to get current.
Benefit: Reinstates the present mortgage
Disadvantages: This will result in a 2nd lien being placed on the property for the amount of arrears. reinstates the mortgage
Sell to a friend or family member "that you trust": This will allow the homeowners to continue living in the property.
Benefit: Home owner can cash-out on some of the equity, with a family member or friend buying above what was previously owed.
Disadvantages: Home is no longer in home owners name, no tax benefits, and eviction is possible by friend or family member
File Bankruptcy: Include the house in a (Chapter 13)
Benefits: Home owner can include other debts and get legal protection with consolidation
Disadvantages: Must keep up with the court-ordered repayment plan, Attorney gets paid first! even before your mortgage.
LOAN MODIFICATION: A modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan.
Benefits: Involves a reduction in the interest rate which lowers monthly payments, forgiveness or reduction of some principle balance, no harm is done to the home owner's credit rating, and a way to avoid foreclosure.
Disadvantages: is that a loan modification cannot be used to increase the amount of the loan; you can't treat it like a refinance and take out equity.
Do your homework before you attempt to contact your lender about a Loan Modification. The lender is a debt collector-you need to know how to get your application APPROVED. It is important to get the most up to date and complete information you can so you will be able to present your loan modification application properly and have the greatest chance for an approval. Learn to do a Loan Modification yourself with a 60 Minute System Guaranteed!
"Click Here"
A Forbearance agreement: A forbearance agreement is an arrangement to postpone a borrowers monthly payment for a limited and specified time period.
Benefit: Payment plan provides short term payment relief
Disadvantages: Daily Accrued interest continues to build and arrears are not forgiven. Home owner will still need to catch-up payments.
A Refinance through a Private Investor (Also, known as a Hard Money loan, or Foreclosure Bailout Loan)
Benefits: Low documentation, and quick processing which can result in closing in as little as 5-10 days. Also bad credit is excepted because the loan is equity based.
Disadvantage: High interest rates ranging from 10-13% on average with some type of prepayment penalty. Also, closing costs which are rolled into the loan can be double traditional amounts because some investors require more prepaid escrows for your taxes and insurance. Also, must owe less than 70% of value
Short Sale: The bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the mortgagor (Home owner). This negotiation is all done through communication with a bank's loss mitigation department. The home owner sells the mortgaged property for less than the outstanding balance of the loan.
Benefits: Debt is paid off and the you are able to save your credit to be able to purchase another home.
Disadvantages: The home owner must vacate the property, and home owner cannot receive any proceeds from the sale (No Money). Must have a prequalified buyer with an offer in order for lender to even consider the possibility of a short sale. The lender can issue a mortgage deficiency for the difference in balance owed and what the property sold for.
For FHA loans: obtain a partial claim to get current.
Benefit: Reinstates the present mortgage
Disadvantages: This will result in a 2nd lien being placed on the property for the amount of arrears. reinstates the mortgage
Sell to a friend or family member "that you trust": This will allow the homeowners to continue living in the property.
Benefit: Home owner can cash-out on some of the equity, with a family member or friend buying above what was previously owed.
Disadvantages: Home is no longer in home owners name, no tax benefits, and eviction is possible by friend or family member
File Bankruptcy: Include the house in a (Chapter 13)
Benefits: Home owner can include other debts and get legal protection with consolidation
Disadvantages: Must keep up with the court-ordered repayment plan, Attorney gets paid first! even before your mortgage.
LOAN MODIFICATION: A modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan.
Benefits: Involves a reduction in the interest rate which lowers monthly payments, forgiveness or reduction of some principle balance, no harm is done to the home owner's credit rating, and a way to avoid foreclosure.
Disadvantages: is that a loan modification cannot be used to increase the amount of the loan; you can't treat it like a refinance and take out equity.
Do your homework before you attempt to contact your lender about a Loan Modification. The lender is a debt collector-you need to know how to get your application APPROVED. It is important to get the most up to date and complete information you can so you will be able to present your loan modification application properly and have the greatest chance for an approval. Learn to do a Loan Modification yourself with a 60 Minute System Guaranteed!
"Click Here"
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