Results
Weighing Your Options
The final results of your loan modification process will be presented to you for approval. Results can be one of many or a combination of options that make your home loan more affordable. We have listed some of the options that lenders may present you with.
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 that 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
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 is 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, and 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.
Cash For Keys
Cash For Keys is a term that is applied to the situation where the homeowner volunteers to fore go 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.Weighing Your Options.