This past week has been terrible for interest rates and the recent boom in refinances. During the past 12 days or so the interest rates have moved up almost one full point. This is definitely is bad for the refinance industry, but it can also have long-term consequences for the loan modification industry as well. A reason for this is simple. When interest rates are low, the decision whether bank to reduce the consumers rate and modify their mortgage is easy. Recently, interest rates have been as low as 4.5% since many people at interest rates higher than the level banks were handing out modifications like candy. Recently, rates have climbed to 5.5%. Although they are still low it appears that the trend is changing. If interest rates continue to rise thanks will find it difficult to offer modifications to their customers because it would require them to reduce their interest rates to levels that are below market. At that point the modification does not become attractive to the bank and the denial is more likely. It is impossible to predict the long-term trend for interest rates, however based on the recent activity it appears we have seen the bottom. Act now before it’s too late. My Do-It -Yourself Guide is all you need to be on your way to a lower mortgage payment quickly. Visit www.mortgageloanmodificationsecrets.com for more information on the guide
June 10, 2009
May 7, 2009
How does a loan modification work
Do It Yourself Loan Modification
As a mortgage and loan modification professional, I am constantly asked” how does a loan modification work”? Although the term has only become popular within the past 12 to 18 months, loan modifications have been around as long as the lending business has. Until recently, the term was basically unknown because the results were not very successful. Things are very different today. Now is the time to take advantage of an amazing opportunity because of the economy.
A loan modification is simply a change, adjustment or an amendment to the original mortgage that a homeowner secured when purchasing their home. For example, let’s assume that you took out a fixed rate mortgage for $100,000 at 7%. At the closing on your property, you are required to sign a myriad of documents. One of those documents is called a Note. The note outlines the parameters in which your loan will be paid back. It includes the interest rate, the terms, the payments and conclusion date of the loan. Any alteration or change made on that Note is a modification. Loan modifications are achieved through negotiations with your lender. Your lender is the only one authorized to change or modify your note. Many consumers mistakenly believe that when they hire a professional service to modify their loan, that the company representing them actually performs the modification. That is the furthest thing from the truth. Loan modification companies merely act as your representative by preparing the necessary documents and communication needed to revise your loan. For this service they will generally charge approximately $2000. If you have a little free time and a desire to save money, you can easily accomplish this on your own with the same or better results. Remember, banks don’t charge for the loan modifications, modification companies are the ones that charge. If you do it yourself, it’s free. Plain and simple.
A loan modification works by putting the consumer in a better financial position than they were before. It works because it benefits both the borrower and the bank as well. The benefits to the borrower are obvious, a lower mortgage payment. The advantage to the lending institution can also be significant as well. Many people do not understand why a bank would be willing to reduce their interest rate without requiring a refinance or upfront money. As a result, most consumers are reluctant to explore the possibility of a modification because it doesn’t appear to make sense. “Why would the Bank just reduce the rate for no reason?”. Today, lending institutions are evaluating their entire portfolios and trying to improve stability. For example, if a loan is currently at 6 1/2 %, reducing the rate to 4 1/2 % would increase the strength of that loan by lowering the payment for the consumer. Another words if the bank reduces the payment on the loan, the possibility of a default by the borrower diminishes. Similar to the insurance companies, lending institutions utilize actuaries to calculate the risk on their portfolios, and what can be done to reduce it. Since bank portfolios are at the highest risk levels in history now, there is an explosion of loan modifications.
In addition, interest rates are at the lowest levels in recorded history. These new levels are now prompting banks to look at all of their customers to see if they are eligible for a modification. The consumer benefit is huge. It is not just the individual who is behind with his mortgage, or has bad credit or no equity. They are evaluating everybody to see how they can improve their portfolio. However, they are not proactive in contacting you. You need to initiate the action. If you know what the bank is looking for, you answer the qualifying questions correctly, put together a solid budget then you will easily qualify for a loan modification for free. Before you contact your bank is important that you do some preliminary research so that you’re prepared. Once you have the necessary tools you can achieve the same results as the professionals do, for free. A Do-It-Yourself loan modification guide is all you need to help you through this simple process. There is absolutely no risk to at least explore the possibility of a modification with your lender.
