What actually changes on my loan?
Through a modification process, your mortgage lender agrees to change your interest rate, your principal balance (through a reduction), your loan term (ex. from adjustable to fixed) and any or all of the above.
Why would a lender modify my mortgage?
Lenders have realized that in some cases it is better for them to work with their current borrower to lower their payment or possibly improve their terms in order to keep them in their property. The average foreclosure can cost a lender from 35 to 50% of the value of the property (or more) so keeping a borrower in their home is better for everyone.
If I receive a loan modification, will the credit reporting for my mortgage be affected?
Your credit score may be adversely affected by accepting the temporary modification period process. During the temporary period, we’ll continue to report your loan payment status to the credit reporting agencies. Your loan will be reported as past due during the trial period plan, even if your loan was up to date prior to the trial period. If your loan was up to date when you entered the trial period, and you make each trial period payment on time, it will be reported as current, paying under a partial payment agreement. Completing a modification will not change previous negative reporting. The impact of a permanent modification on a credit score depends on the homeowner’s entire credit profile.
What if I don’t qualify, can’t afford my home, and owe more than it is worth?
You are not alone and foreclosure is not the only option. If your mortgage lender or servicer will not willing to work with you to reduce your payment, you may want to consider a short sale. Our team is able to assist with these as well. A short sale allows you to sell your home for less than what you owe and avoid foreclosure if you qualify.
What is the difference between a short sale and a foreclosure?
Foreclosure is a legal process used by your lender to reclaim a property that is in default and sell it to pay off your loan. A short sale is a workout that when approved by your lender would allow the home to be sold at fair market value even if it is less than the total amount due on the loan. If you owe more than your home is worth (its market value), a short sale may be a good option for you if you have experienced a financial hardship and can no longer afford your home. Foreclosure will reflect more negatively on your credit report than a short sale.