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Loan Modification? 21 Questions To Ask

22 Jul 2009 · Kurt

LOAN MODIFICATION and FAQ’s

What is a loan modification?

A loan modification is when a lender is willing to modify the terms of loan. Typically the lender will temporarily adjust the interest rate, extend the length of the loan, adjust the payments to interest only payments, defer interest on the principle and in some VERY rare instances possibly reduce the principle balance in order to make payments affordable for the homeowner and keep them from losing the home.

  1. IS A LOAN MODIFICATION RIGHT FOR EVERYONE?
  2. Do I Qualify for a Loan Modification?
  3. Can I Do a Loan Modification Myself?
  4. Does A Loan Modification Cost Anything?
  5. Will the Bank Reduce My Loan Amount or Principle with a Loan Modification?
  6. Are All Loans Eligible for a Loan Modification?
  7. What is the Difference Between a Loan Servicer and a Loan Investor?
  8. How Do I Know if My Loan is Owned by Fannie Mae or Freddie Mac?
  9. What is Required In Order to do a Loan Modification?
  10. Can I Do a Loan Modification and a Short Sale at the Same Time?
  11. Do I Have to be Behind on Payments in Order to do a Loan Modification?
  12. Will A Loan Modification Affect My Credit?
  13. How Do You Handle Loan Modifications? Do You Hire Other 3rd Party Companies?
  14. How Long Have You Been Doing Loan Modifications?
  15. Why Would My Lender Agree to a Loan Modification?
  16. Should I Do a Loan Modification or a Short Sale?
  17. Are There Any Guarantees in Doing a Loan Modification?
  18. Do I Need An Attorney to Do a Loan Modification?
  19. Can Obamas 2009 Mortgage Plan Help Me?
  20. Should I Pay Any Loan Modification An Up Front Fee?
  21. How Do I Start the Process?

1. IS A LOAN MODIFICATION RIGHT FOR EVERYONE?

NO! There are too many companies springing up that are telling everyone they should do a loan modification and promising the world to them for results, all the while charging incredible fees. This is NOT a one size fits all solution. It is important to understand that loan modification terms for the most part are temporary and principle reductions are VERY rare. So unless you have a hardship that you can prove, and want to stay in your home for longer period of time, and are alright with the fact that your home will still be upside down in equity, you may want to pursue other options such as a short sale to get rid of the home. If you simply want to get out of the home and the debt, and dont want to wait for the market to turn around and for your equity to come back, or need to move for other reasons, such as a job relocation, then a short sale may be a better option or you.

Another thing to consider is that if you do not have a current job, it will almost be impossible to do a loan modification.

Every person’s situation has to be assessed by a professional during a consultation. So please read the answers to these questions and when you are ready call Kurt Wannebo 858.405.5878 (personal cell), where he will give you a FREE, NO OBLIGATION 1 hour phone consultation to determine what solution is best for you, and what your likely outcome will be. Thank you for reading…

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2. Do I Qualify for a Loan Modification?

In order to qualify you need to have some type of hardship or situation that has changed in you life, below are reasons that would make you a great candidate for a loan modification.

  • Any homeowner with a “PayOption ARM” or increase in mortage payments
  • Any homeowner behind on Payments
  • Any homeowner with a “hardship” or inability to pay what is currently owed
  • Any homeowner that has little to negative equity
  • Any homeowner that cannot refinance

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3. Can I Do a Loan Modification Myself?

Maybe. Just with any real estate process you are free to try and do it your self for free, but we have found that many times homeowners can do more harm than good. It is imperative to know the formulas and calculations to submit to the banks in order to get the best loan modification for you. You need to have the expertise to be able to negotiate with your bank and know what they are willing to do. Also it can be very time consuming calling the bank every day and waiting on hold, which is what we do.

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4. Does A Loan Modification Cost Anything?

Yes, if you use the services or a professional. No, if you do it yourself. Unlike a short sale which doesnt cost you anything because a bank will pay a Realtors fees, banks will not pay for someone to help you do your loan modification. So the cost is passed on to you, to pay the professional to help you out. Be very wary of anyone who tries to charge an upfront fees, as many scam companies have popped up all over to take advantage of people in a hardship position. Please call us for your FREE 1 Hour consultation and we will help you weed through the scam companies from the ones we have done very through reserach on.

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5. Will the Bank Reduce My Loan Amount or Principle with a Loan Modification?

More than likely NO. They will reduce your interest rate, make your payments interest only, extend the loan term, or possibly defer interest payments. We have never heard of a bank doing a straight principle reduction or ever seen it in writing. We advise you to be extremely skeptical of anyone making claims to lower your principle balance. There are VERY rare instances in which attorneys will sue your bank for you, for very large fees, based on predetory lending practices (RESPA or TILLA violations), in which they may be able to get your lender to reduce the balance. Typically the reduciton is only the amount accured on a negative amortization loan. This is a very win big, loose big model of loan modification, and we do not recommend it. These attorneys will charge alot of money to do this litigous model, and if you loose, then the likelyhood of doing a normal loan modification, may be impacted. Bottom line with the majority of loan modifications that banks are providing you will typically still owe what you borrowed when you are finished with the loan modification and if you ever go to sell. The payments will just be more affordable for a period of time in order to keep you in the home.

The Obama 2009 Mortgage Relief Plan just issued its guidelines on 3-4-09, and it clearly states that principle redcutions are completely voluntary by the banks and its investors and they do NOT have to do so. The Obama administration is also trying to get a law passed where bankruptcy judges will be allowed to reduce principle balances on primary residences but no law has been approved or put into affect quite yet, as there has been adimant resistance. Go HERE to Read More About The Obama 2009 Mortage Relief Plan

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6. Are All Loans Eligible for a loan Modification?

Potentailly. All banks at this point of the market are willing to do some type of workout with the borrower. Its important to understand that it isnt always up to the bank who services your loan (your bank), but who ultimately owns your loan (loan investor), as to whether or not they will be willing to do a loan modification. At this time the Obama 2009 Mortage Relief Plan, has stated that all loans that are owned by Freddie Mac and Fannie Mae, will be offering loan modifications to potentially troubled borrowers, and the guidelines to which they are required to follow. Likewise, the plan urges all other banks and loan investors to comply to these guidelines as well, if they are receiving TARP funds, but it is still strictly up to each bank and investor as to whether they will allow a loan modification and with what terms.

See Question 8 to determine if your loan is owned by Fannie Mae or Freddie Mac

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7. What is the Difference Between a Loan Servicer and a Loan Investor?

A loan servicer is usually your bank that you deal with and make payments to. An Example would be Countrywide or Chase. They may have orginated your loan but then they sell them off to investors who ultimately own them. There are thousands of investors our there, but the largest and buyer of most conforming loans are the companies called Fannie Mae and Freddie Mac. Usually you will never speak to the investor who wons your loan, and it is very rare for any bank to actaully to still be the owner of your loan, although many local credit unions, do own thier own loans.
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8. How Do I Know if My Loan is Owned by Fannie Mae or Freddie Mac?

To find out if your loan is owned by Fannie Mae or Freddie Mac, and if your loan is one that could possibly be helped by the Obama 2009 Mortgage Relief Act use the info below:

For Fannie Mae’s Resource Center, the telephone number is 1-800-7FANNIE or 1 800 732 6643 (8 a.m. to 8 p.m. EST) or inquire online HERE

For Freddie Mac, the telephone number is 1-800-FREDDIE or 1-800 373 3343 (8 a.m. to 8 p.m. EST) or inquire online HERE

Alternatively, a borrower may contact the lender or loan servicer to inquire as to whether the underlying loan is owned or guaranteed by Fannie Mae or Freddie Mac.

 

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9. What is Required In Order to do a Loan Modification?

First thing is to call me, for your FREE 1 Hour NO Obligation Phone Consultation. Then if you decide to move forward with the loan modification, I will walk you through a financial worksheet. You will then need to gather financial information about yourself, such as your last 2 years of tax returns, last 2 banks statements, and last 2 pay checks.
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10. Can I Do a Loan Modification and a Short Sale at the Same Time?

No. Most lenders will not allow these procedures simultaneously. If you want to keep your home then you have a consultation to see if a loan modification is a viable option for you. If so, then work the loan modification first, if it is denied or the terms are unacceptable to you and you need to sell the home, move on to a short sale. If you definately want to sell and get out of the home, then start directly with a short sale.
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11. Do I Have to be Behind on Payments in Order to do a Loan Modification?

Not anymore. In the past year or so, most lenders or banks would not talk to you or figured that the borrower wasnt in a hardship until they were behind on payments. But the truth is, you never had to be behind in the past, and the Obama 2009 Mortage Relief Plan, clearly states now that a borrower does NOT need to be behind in payments in order to do a loan modification. I would question the integrity or experience of anyone telling you to intentionally to miss you payments in order to do a loan modification.
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12. Will A Loan Modification Affect My Credit?

Actually doing a loan modification will not have any impact on your credit, UNLESS you miss any payments during the process. This is why it is so important to question anyone telling you that you have to miss your payments in order to do a loan modification. They could be potentially having you hurt your credit unneccessarily.
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13. How Do You Handle Loan Modifications? Do You Hire Other 3rd Party Companies?

We handle them ourselves as well as outsource them. We have done a significant amount of research on companies out there, and weeded through the ones that are legitimate and those that are looking for simply a quick buck. We work with several loan modification companies and attorneys, and we will guide you towards the one that best suites your needs depending on your situation and type of loan that you have.

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14. How Long Have You Been Doing Loan Modifications?

We have been doing loan modifications since they started and also have been doing extensive research along the way to determine which companies have the highest success rate, the best rates, and can handle the different types of scenarios that are presented. Each case is different and needs to be handled by someone that has an expertise in the problem you are facing.
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15. Why Would My Lender Agree to a Loan Modification?

Your lender may agree to loan modification if you are suffering a hardship and reducing the payments will enable you to stay in the property longer and avoid foreclosure. Also if you have an increase in payments, with an adjustable loan, or an increase in expenditures, it is possible that the lender may reduce your rate, not impose the higher adjustment, extend the terms, or forbear interest on a portion of the balance of the loan. Again, however most lenders are NOT reducing principle in ost cases. If the lender determines you are not a good candidate for a loan modifcation, they may deny you, or recommend you short-sale the property as soon as possible, if they detemrine that would be a better option for the bank.

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16.Should I Do a Loan Modification?

If you would like to try and keep your home, then yes a loan modification would be the first option for you to pursue. If you want out, then a short sale is a better option. There are two ways to do a loan modification, the first is to do it yourself, and the second is with the help of a professional. It’s just like selling your home, you can do it yourself, but the chances of success are much greater if you employ the services of a professional.

To do it yourself you will be required to provide a substantial amount of financial information to your lender and the process takes about 2-3 months, and is very much like a short sale, however you are trying to show to your lender that you are not able to make your current payments, but you could afford to make payments on an adjustment on the loan in the form of interest rate reduction or a longer term loan.

If you do use a professional, please be sure to do your research on them first. Many companies are springing up everywhere, and many are not licensed, and do not have the proper Department of Real Estate contracts in place in order to charge you any upfront money. We know many reputable loan modification companies that we can refer you to, and have give you a fee consultation.

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17. Are There Any Guarantees in Doing a Loan Modification?

There are no guarantees, when trying to do a loan modification. The lender will review your financial information and determine if making any adjustments to monthly payments can keep you in the home longer, while at the same time still making a profit for the investor who owns your loan. If the bank determines that you make enough money to continue on with your current payments, or that the investor of your loan would be better suited by allowing you to a short sale or foreclose, they can possibly deny you a loan modification. It is entirely up to the bank and the investor of your loan to determine this and make the decision. If the bank denies your loan modification request then it is up to you to determine if you should continue making payments, sell the property in a short sale, or let it go to foreclosure.

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18. Do I Need An Attorney to Do a Loan Modification?

Possibly. If you would like to do a normal loan modification than any licensed professional can help you, but cannot charge you up front fees, unless they have a contract to do so that has been approved by the Department Of Real Estate (DRE) and you should ask to see a copy of this of anyone asking up front fees. If you have a NOD filed or would like to try and sue your bank for any predatory lending violations then you will need to hire an attorney to do this and to do any loan modification. We work with several attorneys that specialize in this and can refer you to them if you would like.

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19. Can Obamas 2009 Mortgage Plan Help Me?

Please READ our 2009 Mortgage Relief Plan page by clicking HERE.
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20. Should I Pay Any Loan Modification An Up Front Fee?

Any Real Estate Company asking you to pay an up front fee to do a loan modification has to have a contract approved by the Department of Real Estate (DRE) in order to do so, and provide to you a break down of how money you will get back if the results are unsuccessful. This is because the DRE does not allow brokers to charge for services that may not come to completion and it is a problem spreading wide and rapidly. Many companies are attempting to take homeowners money up front with no promise of results. DO NOT FALL INTO THIS TRAP! Many real estate companies can charge up front fees but first be sure to ask for a copy of thier approved contract, so you know how much exactly you are entitled to as a refund should the loan modification not work.

Also you can check on this WEBSITE HERE to see if the company you are speaking with is allowed to charge you up front fees.

Attorneys are the only exception to this rule of charging an up front fee.

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20. How Do I Start the Process?

First thing to do is contact Kurt Wannebo 858.405.5878 (personal cell) for a free 1 Hour phone consultation to make sure a loan modification or short sale is right for you, or fill out our website form. From there he will set up a time to cotact you and again counsel over the phone and go over the entire process and our methods of doing loan modifications and short sales. There is NO OBLIGATION and NO FEES for this consultation!

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Kurt Wannebo
San Diego Real Estate and Investments
www.sdreai.com


Kurt Wannebo

California / San Diego Real Estate & Investments / Broker Kurt · 3636 Nobel Drive · Suite 170 · San Diego, CA 92122

Phone: 1.888.473.7324 · 858-412-5541 · Email: info@sdreai.com

CalBRE#: 01468255

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