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Timothy Stull

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About Loan Modification

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Loan modification allows homeowners and lenders to change the terms of a loan in order to help the borrower stay in the home and avoid foreclosure. It is important to note that a loan modification is not a new mortgage. A loan modification is the renegotiation of an existing loan.

With a loan modification, it's possible that:

  • your interest rate may be changed
  • your interest rate can be changed from an adjustable to a fixed rate
  • the time you have to pay the loan back may be lengthened
  • the loan principal may be decreased
  • late fees may be waived
  • your second mortgage could be waived or wiped off of the books
  • you may stop the foreclosure process
  • a cease and desist order can be filed on your behalf to stop the harassing phone calls from your mortgage company

The process will typically take 4 to 6 months.

Why Should I Choose FreshStart?
Experience, Experience, Experience! We can't say it enough! We have over 40 years experience negotiating with lenders. Our team of real estate professionals, mortgage consultants, loss mitigation specialist and real estate attorney’s leverage their experience into getting you a solution to your mortgage problems. In addition, we have established relationships with almost ALL the major lenders/banks/credit unions which helps make your process Fast and Easy. Most importantly, we guide you through all phases of the process and keep you informed on the status of your solution.

What Is A Loan Modification?
A modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.

Why Would My Lender Agree To Accept A Loan Modification?
Remember banks are in the lending business, not the real estate business. They cannot make money unless loans are made. Holding property in inventory does not make the bank money. In fact they lose even more money because the home is now vacant, subject to vandalism and the maintenance and upkeep is costly. The bank also has to hire a property management company to oversee the property and eventually a Realtor to sell the property. Get the picture. The bank does not want your home property. It comes down to simple math the bank rather take a guaranteed return on their investment today over a possible recovery of part of their investment 6-12 months later.

What Are The Advantages Of A Modification Over A Refinance?
Loan modifications do not have costly closing costs, title/government fees and painful points/broker fees. Most importantly however modifications do not have pre-set credit requirements or LTV restrictions that limit refinancing options for most homeowners in today’s market.

How Long Will This Process Take?
Typically the process takes between 30-90 days. Each lender has different requirements and different time frames and thus each case is unique. Another important factor to remember on a short sale is that the time frame is dependent on how quickly we can get an offer on your home. In many cases, you may already have an offer or be working with an agent so this may expedite the overall timeframe.

Do I Have To Be Past Due On My Mortgage To Qualify For A Loan Modification?
No, Not always. Most banks/lenders will work with all homeowners; however the basis for them approving a short sale/loan modification is that the borrower is experiencing some form of hardship.

Will A Loan Modification/Short Sale Affect My Credit?
When obtaining a loan modification there is no adverse affect on your credit. The lender agrees to the new terms of your loan with no negative repercussions. A Foreclosure causes significant damage to your credit. Typically, borrowers see a 200 to 300 point reduction in their FICO score following a foreclosure.

Is My Property Still Eligible For A Loan Modification If I Have More Than One Mortgage On It?
Yes. The process is the same regardless of how many loans you have on the property even if the loans are with different lenders.

When Is The Best Time To Start The Loan Modification Process?
It will be best for you to start the process as soon as you can after you've realized that you can no longer afford your payments. The earlier you can bring us into the picture, the sooner we can get our team negotiating with your lender.

What Is The Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

What Does That Mean?
Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income.

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