FAQs About Loan Modifications In Maryland
What Types Of Property Are Available Under Mortgage Modification?
Most government sponsored loan modifications or government encouraged loan modifications are just trying to save home owners. If you’re living in your house, you could talk to your bank about one of those programs. If it’s a rental property or a vacation home or investment property, you’re less likely to get a loan modification, but it depends on the lender. The lenders get a big portfolio of loans that aren’t paying and they may want to try to work something out. It never hurts to ask to see if they will be willing to work with you.
If you have some kind of plan that makes sense, such as if the property is rented out and generating income and has a steady income, they’re far more likely to work with you than if it’s a vacant house that you hope to rent someday.
Will Any Late Charges And Penalties Be Included In A Loan Modification If It’s Approved?
Generally, when you get a loan modification, in particular FHA loans, they will wrap up all the back payments, the late payments, etc., either into the new loan or they’ll put it in the backend in some kind of loan that’s either got to get paid off 30 years down the road or at some point, when the house is sold. Generally, when they modify the loan, the idea is to get you into a payment that you can afford given your current situation.
It all depends on the individual bank, as the banks can adjust the terms of the loan mod as this is the same as standard loan modification, they can do different things. Generally, they wrap up all the back payments, put them on the end of the loan. Some lenders will forgive parts or all of the bad payments if you own the house for long enough. In some cases of loan modifications, if you sell the house for your profit, within 2 years, you have to pay back 50 per cent of the back payment or 4 years, it’s 25 per cent or something similar, they call it equity sharing program.
If the house goes up in value, you agree to pay back some of the back payments that were put on the backend of the loan but every situation is pretty unique. There is no standard loan modification but generally, the idea is to at least get you the payment where you can afford the monthly payments.
Attorney James Logan has also seen loan modifications where you can afford the monthly payment but they put so much on the backend of the loan that essentially you’re renting the house. In one case, you’re putting about $120,000 on back payments on the house and the house is only worth $230,000, so the house might have to go up to well over $300,000 of value before the guy can ever sell it and not owe all the money. In that case, you’re basically just renting the house because you’re never going to owe it. But as long as you stand there, it’s worth fighting, you just want to be able to make payments.
How Long Does The Mortgage Modification Process Typically Take?
Generally, if you go out and get a new loan, they’ll tell you in 30 days and you’ll have it done in 30 to 60 days. There is really no difference in paperwork in terms of refinance and of loan modification. The lender is going to want to see your pay stubs, your tax returns, and your bank statements, and they should be able to make a decision fairly quickly. Obviously, when you’re refinancing, the lender is looking to make a new loan and make some money so they act quickly.
With loan modifications, they don’t have any incentive, so they drag on and on and on. I’ve seen them go from anywhere from 3 to 4 to 5 months to 3 to 4 to 5 years, and it all comes back to the banks. They can really do whatever they want when it comes to loan modification. So, if they want to drag it out, they they’re willing to do that.
How Often Are These Mortgage Modifications Successful For People In Keeping Their Home?
Somewhere between 70 and 90 percent of people default on loan modifications.
Attorney James Logan has seen loan modifications where they reduce the payments $20 to $30 a month, and that doesn’t really help people. But if you do get a loan modification that significantly reduces the payments, a lot of times, whatever event caused you to fall behind on the original mortgage will come back again to haunt you, instable income or an illness or some other family problem, divorce, if you’ve got separated and you just don’t have the income anymore. So, unfortunately, a lot of people do fall behind and default again on the loan modifications.