Possible Loss Mitigation Results

No two loan modification programs will produce the same results. Because everyone's situation is different the results will be too.

There is also no guarantee that your lender will offer you a modification that works for your circumstances. Remember to:

 

• Treat Your Negotiations As A Business Transaction
• Gather Your Information And Documents Promptly
• Organize A File That Includes A Conversation Log
• Keep Copies Of All Of Your Paperwork
• Develop A Call Follow Up System
• Be Honest and Sincere With Your Lender
• Weigh The Benefits Of Hiring A Professional
• Be Patient

 

The following is a list of possible results of your loan modification.

Interest Rate Reduction

In order to accommodate a homeowner, lenders sometimes offer a reduction in the interest rate of their current mortgage thus reducing the monthly payment amount. This is a common result especially in cases of and adjustable rate mortgage that has reset at a higher rate that generated a payment that was unaffordable to the homeowner.

Principle Reduction

In cases where an interest rate reduction is not enough to generate an affordable payment the lender my grant a principle reduction on the existing loan. This result is a less common one and more difficult to obtain. In short it is a "something is better than nothing" alternative for the lender that occurs in areas where home prices have fallen a great deal. It is sometimes better for the lender to keep a smaller performing loan than it is to pay the expenses of a foreclosure and resort to selling the home for a lesser price than the principle reduction would have been.

Forbearance Programs

This is a repayment plan is agreement that gives a borrower a specified amount of time to bring a delinquent mortgage account current by paying the normal monthly payment plus an additional amount each month to cure the delinquency. A repayment plan is considered when the delinquency resulted from a temporary hardship such as illness or job loss that has been resolved or will soon be.

Partial Claim(FHA Insured Loan Only)

Under a partial claim option, a lender will advance funds on  behalf of a mortgagor in an amount necessary to reinstate a delinquent loan. The mortgagor, upon acceptance of the advance, will execute a promissory note and subordinate mortgage payable to HUD. No interest is charged on this subordinate loan, but HUD reserves the right to charge interest in the future. Also, no payment of principal is due until the borrowers either  pays off the first mortgage or no longer owns the property. After the paper work is complete, the lender submits a partial claim to HUD for the amount of the advance.

Short Sale Or Short Payoff

A short sale is the sale of a property for less than the total amount necessary to satisfy the mortgage obligation when the borrowers are unable to pay the shortfall from their own funds. This will result in the sale of the home, however it is a better option than foreclosure in that the homeowner will be released from their total mortgage obligation.

Deed In Lieu Of Foreclosure

When a mortgage is in default and it is concluded that there is no alternative for resolving the delinquency, including the sale of the home, the lender may agree to a voluntary conveyance of the property from the borrower in exchange for full satisfaction of the debt. There can be no other liens on the home for this to be an option.

Bankruptcy

Filing bankruptcy can be a way to delay foreclosure, however it is not a permanent solution. The decision to file bankruptcy during foreclosure should be made with the advice of an attorney. Whether you qualify for a Chapter 13 or a Chapter 7 bankruptcy, or even if you keep you home as a result of the process are decisions that should always be made with legal advice. If you are considering bankruptcy as an option you should be aware of the costs involved and the time frame for filing as soon as possible.

Cash For Keys

Cash For Keys is a term that is applied to the situation where the homeowner volunteers to forego the eviction process in return for a cash settlement. Some lenders may not accept this offer during foreclosure, only after the foreclosure process is complete. In other cases making the offer to your lender in advance may give you the advantage of a higher settlement amount. Expect around 1% of your home's value as a settlement and make your offer in writing.

Although we have listed some of the possible results of loan modification and lender negotiations your results may not be limited to these. Every homeowner's situation is different and requires a solution tailored to their needs that the lender will accept. Foreclosure is an option that we have not listed however it is almost always the outcome of waiting or taking no action on your own behalf. Don't let fear keep you from taking action. Both you AND your lender stand to lose the most by waiting.