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  • Home Loan Modification Issues

    What issues are addressed in a home loan modification?

    The legal fees required to make modifications to the home loan can be included into the newly negotiated principal balance of the home loan.

    If the home owner has accrued any late penalties under the current mortgage agreement, then the lender should waive all of these penalties as part of the home loan modification as part of the mandate to ensure the home owner can afford their payments uner the modified home loan agreement.

    The home loan interest rate will be changed from the rate at which the home owner originally negotiated to the new rate to match the current interest rate. The date upon which the lender approves the home loan modification is the date used to select the new interest rate.

    The entire amount owing (principal) is to be re-amortized over the 360 month (30 year) period of the modified home loan, with the first payment due at the beginning of the new term.

    The lender may choose to include a review of the property to ensure that the condition of the home is such that any upcoming expenses in upkeep can be taken into consideration when modifying the payments so that the home owner can afford both the renegotiated loan modification in addition to any costs that will be required in the future to maintain the property.

    Should the home owner be unemployed with an employed spouse who does not appear on the home loan agreement, then the lender will conduct a review of the total family income and expenses to ensure that the financial situation allows for enough surplus to allow the home owner to make the payments under the new home loan agreement. The situation which allows the home owner to qualify for such an arrangement includes payments that meet the home loan modification amount but is unable to pay for the original agreement arrears.

    The home owner does not need to be delinquent under the terms of their current home loan, but are able to demonstrate impending problems with making payments and keeping current. Perhaps running out of savings due to a recent loss of work can indicate that there could be a time in the near future when the payments will suffer, or more immediate and serious issues such as a health concern, accident, sudden divorce and expensive legal proceedings. Other issues that are considered acceptable reasons include but not limited to death of a family member and other serious issues for a family member that can impact income and revenue, job relocation and military service.

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