How Does Credit Score Impact A Loan Modification?

Loan modifications remain a possibility even if the borrower has impaired credit. Since most individuals who request a modification are behind on their mortgage payments, presumably there was some credit impairment experienced by the borrower before they applied for the modification. With that said, stronger credit is more advantageous, but I don’t think it’s wholly preclusive if there is some credit impairment.

How Does It Impact My Chances Of Getting A Modification If There Is No Equity In My House?

The equity in property does have an impact on loan modification qualification. This is another point where the specific figures are going to vary both lender-by-lender and loan-by-loan. Generally speaking, it is more likely that someone will obtain a loan modification if there is an equity buffer to support the modified loan. There are still some lenders that will consider loan modification on a property that is underwater (meaning that the loan balance exceeds the property value), but that is becoming more infrequent.

How Do I Know If A Loan Modification IS The Right Path For Me?

Usually, a loan modification or at least making an effort towards obtaining a loan modification is going to be the right direction if you have equity in the home and if there is a strong desire to remain in the home as opposed to selling or transferring it. Home ownership is very individualized. People have very personal connections, not only to the home itself but to their neighborhood and the experiences they’ve had in that location. For that reason, some folks will make more of an effort to retain the property. In that situation, loan modifications can be a good option to allow the consumers to get back on track with their mortgage.

What Is The Process To Apply For A Loan Modification?

Generally, the process of applying for a loan modification involves putting together a loss mitigation request package. Each lender usually has their own application that provides for the borrower to disclose their current income, expenses, assets and debts. The borrower will also be asked to provide some additional supporting documentation, which is transmitted to the lender. The lender may have some follow-up requests, and then the lender will make a decision as to whether or not the person qualifies and what terms would apply.

What Is The Hardship Letter? How Is It Used In A Loan Modification?

A hardship letter is a letter from the borrower to the lender outlining the personal circumstances that led them to fall behind. It is one of the documents that are normally required as part of the loss mitigation application, and it’s used to give the lender some sort of contacts and understanding as to whether or not the situation that caused the delinquency was reasonable and whether it is likely to affect the future ability to pay.

Do All Banks Engage In Loan Modification?

Virtually all institutional lenders-meaning all the big banks, such as Bank of America, Wells Fargo and Citi-have some form of loan modification process. For smaller and private lenders, it will vary from lender to lender.

What If The Lender Is Dual Tracking And You Receive A Foreclosure Notice?

Dual tracking refers to a situation in which a borrower is working with their lender to try to get a modification or other loss mitigation alternative, but the lender is moving forward with the foreclosure litigation process concurrently with that request. In Florida and many other states, a lender has to go through a lawsuit in order to be able to foreclose on a piece of property. That foreclosure legal process has many steps to it and it doesn’t occur overnight. In many instances, the lender is proceeding with the foreclosure process while they are working with the borrower to exchange the documents that are necessary in order for the lender to consider a modification.

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