Frequently Asked Questions about Loan Modifications

Q: I have been told that loan modifications are nearly impossible to obtain and that a short sale is my best option?

A: Loan modifications are real and they are issued by lenders. Your odds of obtaining a loan modification yourself or by using an inexperienced or inadequate representative are significantly lower than if you use a person or entity well versed in how loan modifications work. No matter what you do, if you really desire to try and keep your house do not be pushed into a short sale by anyone.  If you determine that a short sale is the best option for you, only do so after you have explored and investigated all of your options.

Q: Can I Qualify If I’m Current on My Mortgage Payments?

A: Yes! The truth is that the eligibility requirements for loan modification are constantly changing and differ among lenders. Many lenders are now completing loan modifications with borrowers who are up to date on their payments. It’s difficult to determine whether you qualify until you actually discuss your situation with the lender or with a professional  who is knowledgeable and experienced in loan modifications.

Q: What does it mean when I was denied for NPV?

A: A denial due to Net Present Value or NPV means that the investor, after analyzing all pertinent information has determined that the investor will lose less money by foreclosing than by modifying.  However, just because you received a NPV denial from your lender does not mean that the NPV is accurate or that the lender processed your loan modification correctly.  We frequently meet with clients that have been denied for NPV, and found either mistakes in the NPV or omissions that eventually allowed me to obtain a loan modification for the client.  In other words, if you have been denied for NPV, we strongly recommend that you contact us for a review of your situation.

Q: Are Principal Reductions Real?

A: In short, yes.  However, it depends on what lender you have and who your underlying investor is.  Some lenders absolutely do not allow for principal reductions while some have been doing so for years. Principal reductions are not an entitlement but a tool that investors can use in attempting to modify your loan.  No one should go into a loan modification expecting a principal reduction.

Q: In utilizing the Loan Modification Option to bring an asset current, can the Lender include all fees and corporate advances?

A: Legal fees and related foreclosure costs for work actually completed and applicable to the current default episode may be capitalized into the modified Principal Balance.

Q: May a Lender perform an interior inspection of the property if they have concerns about property condition?

A: Yes, the Lender may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the Borrower’s continued ability to support the modified mortgage payment.

Q: Can a Lender include late charges in the Loan Modification?

A: The goal in providing the Borrower a Loan Modification is to bring the delinquent mortgage current and give the Borrower a new start; therefore, the Lender should waive all accrued late fees.

Q: When utilizing a Loan Modification Option, can a Lender capitalize an escrow advance for Homeowner’s Association fees?

A: Lenders must also escrow funds for those items which, if not paid, would create liens on the property positioned ahead of the FHA-insured mortgage.

Q: Is there a new basis interest rate which Lenders may assess when completing a Loan Modification?

A: Yes, The Lender shall reduce the Loan Modification note rate to the Current Market Rate.

Q: Are Lenders required to re-amortize the total amount due over 360 month period?

A: Yes, The Lender must re-amortize the total unpaid amount due over a 360 month period from the due date of the first installment required under the Modified Mortgage.

Q: What date is utilized when determining the correct interest rate for a Loan Modification?

A: The date the Lender approves the Loan Modification is the date that Lenders are to use in determining the interest rate.

Q: Are Lenders required to perform an escrow analysis when completing a Loan Modification?

A: Yes, Lenders are to perform a retroactive escrow analysis at the time the Loan Modification to ensure that the delinquent payments being capitalized reflect the actual escrow requirements required for those months capitalized.

Q: Can a Lender qualify an asset for the Loan Modification Option when the Borrower is unemployed, the spouse is employed, but the spouse name is not on the mortgage?

A: Based upon this scenario, the Lender should conduct a financial review of the household income and expenses to determine if surplus income is sufficient to meet the new Modified Mortgage Payment, but insufficient to pay back the arrearage. Once this process has been completed the Lender should then consult with their legal counsel to determine if the asset is eligible for a Loan Modification since the spouse is not on the original mortgage.

Q: I am self-employed and have several sources of difficult-to-prove income, can I still modify? A: My experience has indicated that self-employed people have a more difficult time modifying than W-2 wage earners.  The reason for this is complicated but, to be brief, it is because self-employed people have a more difficult time conveying their financial situation to the lender.  Whatever sources of income that you might have, the lender is looking for the representation of your financial package to look a certain way.  Many self-employed people are denied when they should not be.  It is my job to make sure that your financial situation is properly conveyed to the lender and that any idiosyncrasies are either properly explained or fixed.

  Gateway Consulting – California – San Diego – Loan Modification & Foreclosure Specialists