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What Factors Affect The Eligibility And Process Of A Loan Modification?

How Much Does Someone’s Credit Score Play Into Whether Or Not They’ll Receive A Loan Modification?

Credit scores really don’t have much to do with the loan modification because you’ve already fallen behind and your credit’s probably pretty trashed. The bank is not looking at a modification in a normal realm where they were to see your credit; they’re looking at a modification as “Can we change the terms of this loan in such a way that you can afford the payment to stay in the house and we can award a foreclosure?” That’s really the thought process behind a loan modification.

At the same time, the bank is trying to keep you in the house with a reasonable payment where they can still get some payments from you, but they don’t want to foreclose and take back your house, as they’ll lose money. So, your credit doesn’t really matter so much for loan modification. But the good news is if you get a loan modification and you can make the payments on time, you can actually start to rebuild your credit maybe to a point where in 12 months or 24 months down the road, you’d be able to do a refinance and actually pay off the old loan.

Can Someone Still Qualify For A Mortgage Modification If They Are Current On Payments?

Probably not. That’s one of the interesting things about the lending industry is if you are current in your mortgage and you call up and tell the bank that you’re having problems, they’ll say, “But we can’t work with you until you stop making payments”, which sounds insane but that’s the way the banks seem to want to approach this problem.

On the other hand, from the bank’s perspective, if you’re making the payments, why should they modify the loan? Generally, the modification is going to result in the lower interest rate, which means the bank is going to be making less money. So, if you’re current on your mortgage, you’re probably better off trying to do a refinance and to modify the loan because there is no reason a bank would really want to modify the loan as long as it is being paid.

If Someone Is Currently In A Bankruptcy, Will They Be Eligible For Loan Modification?

Absolutely. In most cases when someone files for bankruptcy, it’ll get switched to a different department, they’ll start talking to somebody different than they were talking to before. This way, they can actually make progress where they couldn’t before.

Many times, the bankruptcy can eliminate other debts and actually increase the amount of money that you can pay for the mortgage, which can make a loan modification more feasible. Sometimes when you’re in chapter 13, the banks will actually offer you a loan modification while you’re in the chapter 13 and an attorney can actually reduce the payments and get you caught up in your mortgage and save your home. The bankruptcy is absolutely not an obstacle to getting a loan modification and in fact, sometimes it makes it more likely that you’ll get a loan modification.

Has This Recently Become The Popular Thing And Working Well?

I don’t know if it works really well. It’s not random, but it’s close to random. The main problem is the banks are pursuing every loan from their perspective. Every particular situation almost doesn’t matter for a loan modification.

If it’s in the bank’s interest, they may do the loan modification and if it’s not, they’re probably not going to do it. Your facts have very little to do with whether you’re going to get the loan modification or not, and a very frustrating thing for people to realize is that, “Hey, I’m working. I’m willing to make payments, why don’t my bank work with me?” And the reality is they don’t have to work with you. So, if they don’t want to work with you, they won’t.

The flipside is that some of these loans may be resold to banks that are more and more willing to work with them because they’re buying it over discount and they’re trying to make them what they call performing loans with the payments are actually being made. So, as time goes on, you may see more people getting offered loan modifications when they weren’t before.

If Someone Has Already Received A Foreclosure Notice, Can The Office Of James Logan Possibly Get A Mortgage Modification In That Case?

Absolutely. A loan modification is a voluntary process on behalf of the bank. Even if they started foreclosure, they can still give you a loan modification. I’ve seen cancelled foreclosure sales a day or two before the auction day because they’re still working on the loan modification. So, the banks can really do whatever they want. No matter where you are in the foreclosure process, it’s almost always worth contacting a lender to see if they’ll work with you on loan modification because they always have the power to do that.

What Other Things Would The Lender Consider When Determining A Borrower’s Eligibility?

If the bank is willing to consider modifying the loan, the first thing they’re going to look at is your income situation. If you don’t have the income to make any kind of payments, it’s unlikely they’re going to give you a loan modification and it doesn’t make sense. If you can’t make any payments, a loan modification is just going to mean you’re going to default next month or two or three months down the road. So, the first thing they’re going to consider is your income. They might look at why you fell behind, if you lost your job and were unemployed for 6 months but now you’re back to work, that may be a consideration.

If you have any down payment you can make, for example if you are able to put a few thousand dollars down in loan modification offers, they’ll work with you. But the main thing is really you got to have some steady approvable source of income because otherwise you they can modify the loan but you still won’t be able to make the payments and you’re going to end up right back in the same spot.

If you have questions about Factors that can affect a Loan Modification, call the law office of Attorney James Logan for a free initial consultation at (855) 4MD-BANK or (410) 243-1508 and get the information you’re seeking.

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