Loan Mods?

[TRfromillino]

What exactly is a loan mod? I keep seeing this pop up and wondered how it all fit in with a Chapter 7? What I've gathered so far, is that it is not a renewal of your loan, but rather a change of terms? I'm still waiting for the lawyer's office to send me my reaffirmation papers that the local bank sent them so see if they changed anything or if it's just a copy of the original. (No I am not reaffirming!) I do plan to pay and stay for however long. I do have a balloon coming up in 3 years which I may be long gone by then but something to consider. I didn't know how one approached something like a loan mod, or even how successful the pursuit of one was.

You all are good leaders, so I will let you share your insight with me! Thanks!

[mknolan]

TR I have a friend who filed 7 about 2 years ago...they then hired an attorney to do a loan mod for them. They were successful, it took about 6 or 7 months. Their mortgage payment went from around $2300 a month to $1200. They were underwater, they bought high $250k, I'm not sure the exact amount they settled on with the Loan Mod but I believe it's somewhere in the neighborhood of $170k. The attorney charged $2500 fee.

[TRfromillino]

Well, I'm nowhere near that amount of $$. And if I had to pay a lawyer that much money, I would prolly end up saving $5/month...lol Just wondered what it was all about.. You hanging in there mk?

[ace300s]

Recently did a Adjustment of Terms Agreement with my lender....

Filed BK7 and was discharged in 06/12. Stopped making house payment for 16 months. I didn't think I'd get any help from the lender. My old payment was only 20%of my income. Everything I read said any type of modification would use the 31% figure.

My lender offered me a 2 1/2% interest rate reduction on my existing loan, which dropped the payment $350 per months. It is not a new loan or reaffirming of my loan. Everything on my existing loan stayed the same except for a reduced interest rate and lower payment. The lender did require a two house payment down payment as part of the approval process. BTW, my arrears are added to the end of my loan. All I had to do is sign the Adjustment of Terms Agreement and fax it back to my lender.

I had my attorney review the Agreement and make sure I was not reaffirming the loan. My attorney told me reaffirming a loan must be cleared by BK court. My loan still remains discharged in BK7. So my new payment is lower than I could rent a place in my area.

Hope this helps.....

[btbeme]

Thats a big question. Lets start with your situation... are you underwater on your house? What is its approximate value vs. your total loan(s) owed, and who holds the note(s)? Are you behind on payments?

A very basic answer is that a loan modification is usually a "recasting" of your current loan so that the monthly payment is more affordable. In a very few cases, that can also mean that the loan amount goes down; however, more typically, the loan interest rate goes down while the term might recast to 30 or even 40 years, and a last-month balloon payment might be set up so that you are actually making payments on a smaller loan amount yet still owe the same total amount as your current mortgage.

Most loan mods either fall under a federally-sponsored program or are offered directly by your lender. In virtually every case, it would be important to only have one loan - the primary mortgage - as a lien on the house. But let's start with square one and analyze your current, actual situation...

[TRfromillino]

btbeme, no I'm not underwater on the house. I have around 15K in equity over the mortgage. The local bank holds the note and I'm current on my payments.

[btbeme]

btbeme, no I'm not underwater on the house. I have around 15K in equity over the mortgage. The local bank holds the note and I'm current on my payments.

If this is a small, locally operated bank then your best bet is to sit with their mortgage specialist after your BK discharge and ask for a modification. Many small and local banks do not participate in federally sponsored modification programs, so it will essentially be their own decision. I would not get too hopeful, as most banks seem to feel that if you are making on-time payments then you can afford your loan - no reason for them to modify. The big exception is someone who is behind and underwater - those are at-risk investments that the bank typically sees a reason to modify in the hope os saving it.

One other option would be to look for another bank or program that would be willing to do the deal, essentially refinancing out of your local bank and into a new loan elsewhere. The big issue on that is that, if you did NOT reaffirm your mortgage, then the new bank / new loan scenario comes with the baggage that you are signing back up for responsibility for the mortgage. There are several programs out there. Whether they would save you a lot of money is unknown and dependent on what they have to offer.

If you have any inkling of leaving the house in the next several years in any way other than a traditional sale, I would not modify, unless your current bank grants you a nice deal. But you will definitely want to see about ridding yourself of that balloon payment, which is the best angle to use when approaching your current bank.