Resources and Information
Understanding Loan Modifications
A Loan Modification is a permanent change in one or more of the terms of a mortgagor's loan which allows the loan to be reinstated, and results in a payment the mortgagor can afford. Below are a few facts to help you understand loan modifications. As a Pacific NW homeowner, you need all the reliable information you can find especially if you are facing the possibility of a foreclosure. Here are a few key points about loan modifications:
- When utilizing a loan modification option to bring an asset current, your legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified principal balance.
- As a mortgagee (lender), you may perform an interior inspection of your property if they have concerns about property condition.
- A mortgagee (lender) should waive all late charges in the Loan Modification as stated by the Mortgagee Letter 2008-21at the time of the Loan Modification.
- HUD Handbook 4330.1 REV-5, Paragraph 2-1, Section B, Escrow Obligations states: Mortgagees (lenders) must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage when a homeowner is utilizing a Loan Modification option.
- Remember this point, if a mortgagor (homeowner) subsequently defaults and qualifies for a Loan Modification, HUD will subordinate the Partial Claim.
- You don't have to be late on your mortgage note but it sure helps if you are seeking a loan modification.
- Loan modifications can happen but we recommend you be prepared for a long drawn out process. Most banks and institutions are understaffed and overwhelmed. All the more reason to secure a real estate attorney and ask for help from a knowledgeable Pacific NW real estate agent experienced in short sales and foreclosures.