Loan Modifications: Win-Win

We’ve all heard about the sub-prime loans offering teaser interest rates to unqualified borrowers. Got 550 FICO? No problem. Got no income? No problem. Those loans blew up last summer, but many people are still saddled with them and, as most were adjustable, thousands, if not hundreds of thousands, are due for re-adjustment–upwards, of course–this year.

Let’s say you’re one of these borrowers waiting for the ax to fall. Or, maybe you’re already behind. What to do? So, what should you do? The answer is simple: CONTACT YOUR LENDER. This is true no matter what the reason for your delinquency-job loss, divorce, hospitalization.

Make sure you speak to the Loss Mitigation Department and not to the consumer help line on your mortgage bill.

As a matter of simple business, the biggest lenders are already offering loan modifications to troubled borrowers. The major problem for lenders is that distressed borrowers tend to resort to denial first, then stick their heads in the sand for the duration. Over 90% of the time, these borrowers never even contact their lenders to explain their situation or try to negotiate a solution. Don’t do that!

So, what kind of deal might your lender offer?  Oh, the lender may offer to bring your payments current, and you can start again with no back debt. Or, if you actually contact the lender and supply financial data with supporting documents [tax returns, W-2s, pay stubs], the lender may drop the interest rate to prevailing rates, even if the borrower has bad credit, forgive 25% or more of the original loan, and bring payments current. That’s not too shabby!

It pays to contact your lender. Even if you cannot make the new payments due to lack of income, the bank may well offer a financial incentive to put the house on the market as a short sale. This is a win-win.

If you are unsure what to do, call me at 626-641-0346 and I will help you.

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