What is Loan Modification?
Loan Modification- This term has been getting a lot of attention lately and rightfully so. With millions of homeowners stuck in toxic adjustable rate mortgages and no ways to refinance out of them, loan modifications may be the only way to assist struggling borrowers. This term is used when your lender modifies your current mortgage (same loan you have, only changes are made to the note) in order to work with you and make your mortgage more affordable. A modification to your rate, balance of loan, delinquent fees owed, term of loan etc. can be made by the Lender. In the past this was only used when a borrower was delinquent but now we will see it being used before someone who is not delinquent. This will be the hottest term and the best way to help people avoid foreclosure.
A Loan Modification will change the existing mortgage note and give the client a fresh new start in managing their home. Accounts will be brought up to date immediately.
With a loan "modification" you take the mortgage you now have and change the interest rate and payment requirements in order to achieve a fixed rate. A change in rates and payments does not result in the need for a new closing, brokerage fees, survey, appraisal, or taxes. In contrast, if you "refinance" a loan you'll be required to have a closing and forced to pay a variety of fees and taxes.
Lenders are willing to negotiate when borrowers are facing financial difficulties and can't obtain other financing alternatives. Cogburn Law Offices shows the lender why it would be in the lender's best interest to agree to a workout arrangement. In turn, the lender will reduce the loan interest rate, reduce monthly payment amounts or change other loan terms to allow for an affordable loan to allow the homeowners to avoid foreclosure.
Cogburn Law Offices brings the two parties of problem loan together to mutually agree to a workout that creates new and better loan terms which are affordable and realistic. The hope is that the new loan will enable to the borrower to meet their obligations. And with Cogburn Law Offices detailed personalized financial analysis, this hope becomes a reality. Our clients accept the loan that is affordable to them, and never need worry about foreclosure again.
Can't I do this myself? Why should I pay someone else to do it for me?
Of course you can negotiate with your mortgage company yourself. Just as some people act as their own accountants or legal representation, some people are knowledgeable enough about mortgage delinquency that they are comfortable negotiating with their mortgage company.
However, for others phrases like "partial claim", "loan modification" and "special forbearance" are intimidating and confusing terms. People in this category may find dealing with their mortgage company to be a dehumanizing experience as they are shuffled along the assembly line-like process, never sure if the representative they are talking to is truly looking out for their best interests or merely trying to meet their quotas while attempting to keep their talk time low.
Cogburn Law Offices does not offer any service to you that you cannot technically perform for yourself. Then why pay us to represent you?
There are many reasons we could provide but perhaps an example would be more effective:
When you are on the phone with your mortgage company and they tell you there is nothing that can be done for you, how do you know if this is the truth or if it is simply what the representative chooses to tell you as a result of their inexperience or apathy? These representatives aren't sitting in an office of their own, thinking about what a great career they have. The mortgage company representatives you will deal with work in call centers - a low-paying, high-turnover field of employment. Our negotiators have more experience in mortgage retention than most any of these representatives, do you?
How many financial transactions are as important to the average person as their home? Much like in any important matter, having the proper guidance and representation can make all the difference in the world. It can save you time, trouble and money.
Does my mortgage company want to foreclose on my property and take my house?
Absolutely not. When a mortgage company forecloses on a property, they almost invariably lose money. They lose even more if they are forced to take ownership of the property. Because of the likely losses on foreclosed properties, there are wonderful ways to either avoid going into foreclosure or to get out of it. This is the good news.
The bad news is that you are really nothing more than a loan number (usually one of millions) to your mortgage company. While not trying to insult your mortgage company, they don't need or want to specifically help you. They simply need to ensure that they meet their numbers. While it may be encouraging to know that their financial interests lie in keeping you out of foreclosure, you should also realize that mortgage companies are some of the largest owners of real estate in the world. This is directly attributable to the sheer number of properties they assume after the foreclosure sale.
What are "hardships" and do I qualify?
Here is an example list of hardships that lenders consider during the loan workout process:
Adjustable Rate Mortgage Reset- Payment Shock
Illness
Loss of Job
Reduced Income
Failed Business
Job Relocation
Death of Spouse or Co-Borrower
Death
Incarceration
Divorce
Marital Separation
Military Duty
Reduced Income
Medical Bills
Damage to Property (natural disaster or unnatural)
Who Will Handle My Loan Modification?
Our loan modification team consists of attorneys and loan modification consultants. While a loan modification can be accomplished without counsel from an attorney, borrowers should keep in mind that the loan they now have was done without an attorney looking out for them. A loan modification can be considered a "new" loan, because there will be a new contract signed. This new contract will have new terms, and new payments. These new terms and new payments should be completely understood by the borrower. Our team will fully and accurately explain the new loan terms and payments.
What Kind of New Terms Can I Expect?
The first thing we tell our clients is that they need to be realistic and understand the situation they are in. If someone owes $500,000 and can only afford a payment of $2,000 per month, and that payment must include taxes and insurance, we immediately let that person know that is unrealistic and they need to sell their home. That person can not afford their house. What is realistic is to expect fixed payments for anywhere from five to thirty years at an interest rate of between five and seven percent. These are realistic numbers for the borrower and the lender.
Do Lenders Reduce Balances?
Many people think that the lenders should write off loan balances as part of a loan modification, and while we agree, the lenders are rarely agreeing to such modifications at this time. Lenders must get approval from their investors, and investors do not like to lose money. However, as the economy continues to have problems and banks continue to report losses, we believe we will see principle reductions becoming quite common as we go into 2009 and the meltdown continues.
