LOAN MODIFICATION!!
I have had many calls and emails with questions about loan modifications in the recent weeks so I figured let's take this head on. First, what's a loan modification? Well, to give you the short answer it's renegotiating the loan you currently have on your home with the same bank that holds your note. It is different than a refinance because you are not getting a new loan you are just renegotiating the one you have. I don't have all the answers about this topic but I do know a few things that I want to share.
1. You do not need to pay to have someone or some company do this for you. I have heard of some people paying $3,000 to $5,000 for loan mods that they could do themselves.
2. It helps if you have already missed a payment or two and credit scores don't seem to matter.
3. The first step is to call the note holder and talk to them yourself. Most of the major banks will direct you to the right person if you just start the conversation off with "I am calling to find out information about modifying my loan."
4. From what I've heard the banks are being very creative with loan mods. Here are some examples of real clients:
a. Susie had a loan with countrywide for $440,000 at 6.5% negative amortization and it adjusted 2-months ago from $2,200 a month to almost $5,000 a month. Susie called Countrywide and they gave her a new loan at 1% interest only for the first year, 2% for the second year, 3% for the 3rd and so on. It's a 5-year loan at which point she will need to refinance or sell. But at least she will get to stay in her home another 5-years at very low payments.
b. Brad had a payment of over $3,500-a-month with a loan amount of $500,000+ and modified his loan to 0% interest for 5-years. His principle payment is $1,600 a month. This allows him to attack the principle at a rate of $19,200 per year. At the end of 5-years his new loan amount will be around $400,000, at which point he can refinance into a 30-year-fixed, hopefully.
5. In all the cases of loan modifications the borrower had a "hardship" like losing a job, death, house payment adjusting from $2,000 to $4,000 not just "I want a lower payment".
6. It helps if the bank you are making your payments to is the "lien holder" and not just a "servicing company".
7. Dave Gaylord, a friend of mine and a loan broker with LoanLink Financial has offered his help for FREE to anybody that wants it. It is his way of giving back to the community and doing what is right. He has let it be known that he will assist anyone that needs the help for FREE. He makes no money from this, just goodwill to the community. He can be reached at 949-939-6011 or by email at dgaylord@theloanlink.com. He is one of the most knowledgeable professionals in the loan industry and defiantly "walks the walk".
8. Loan modifications will not last forever. They seem to have really taken off in the last 2 or 3 months. The banks are doing this so they are not overwhelmed by foreclosures and want to spread their losses over a longer period of time. Who knows when they will reach that magic number and stop modifying loans.
That is everything I know about this subject and pass on the info to a friend. I have been seeing people get taken advantage of lately and hope that this will get into the hands of the one's that need it most.
