Loan Modifications 411

Why would my lender want to modify my loan?

Keep in mind lenders lose money when they foreclose on properties. First, there are the legal costs of the foreclosure process that the lender must incur. Then, bank owned properties will sell for less than market value, and they must pay a commission to a Realtor, closing costs, plus pay the costs of holding the property while they wait for a sale in a market that is depreciating. So therefore it is in the best interest of the lender to modify the loan to get it back to a performing status.

Will my lender modify my loan?

Probably yes, 99% of all "A" type lenders and 70% of sub-prime lenders (with high interest rates) will negotiate a loan modification where:

• most of the delinquent payments and foreclosure fees are either wiped out or added onto the back end of the loan.
• In most cases the interest rate will be reduced permanently.
• In some cases, the principal is also reduced

What are principal reductions?

A principal reduction is a reduction in the overall balance that is owed to the bank. This along with an interest rate reduction can significantly reduce the homeowner's monthly payments.

A property is upside down, or underwater, when the principal balance owed on the home is more than the house is worth. In this case, when the homeowner is also facing foreclosure, the homeowner has more leverage than they may realize against their lender. When you hire us, we will use that leverage upon that lender. In doing so, we can be successful in reducing the principal loan balance.

For example, if a homeowner owes $400,000 on their mortgage but in this current market the fair market value has reduced to $300,000. We can convince the lender to lower the loan amount to the $300,000 figure.

Interest Rate Reductions

One of our strategies is to negotiate an interest rate reduction with the lender on behalf of the homeowner. We will present the case the the lender that lowering the interest rate to current market rates or below will be in their best interest, Alternative to spending money on a foreclosure and losing money on a re-sale.