A New Solution on the Housing Market - The Equity Modification

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Unfortunately, in recent years due to the situation in the housing market in the USA, more and more homeowners are facing crucial problems with making their monthly mortgage payments and risking to be kicked out of their homes. One of the ways to help homeowners to solve their mortgage problems without having to leave their houses is the equity modification program that has been widely developing since February 2009. During the procedure of the loan modification the lender and the borrower renegotiate their mortgage agreement lowering monthly loan payments and making the loan terms more comfortable for the homeowner. The forms of the loan modification can be different and vary from case to case. Usually the first step is the interest rate reduction; it can be lowered to as low as 2 percent and sometimes even less. The loan term can also be increased considerably.

To apply for a modification, the borrower should satisfy a number of rigid requirements, the most important of them are verified financial difficulties that are caused by such valid reasons as health problems, job loss, loss in income and some others. At the same time, the borrower also has to prove his financial capacity to serve the loan in case it is modified.

To find out whether your loan meets the requirements for a loan modification, you should contact your lender and fill a loan modification application. Next, you will be required to describe in detail your financial situation and prove it by official documents. During the loan modification process you should be ready to do a considerable paper work and prepare a great number of written documents. The lender will inspect the description of all your assets, the information on all sources of the household income (before taxes), the last tax returns, the information about the second mortgage on the house if any, the balances on all your credit cards and debts, the application for the equity modification describing all the reasons that led to your financial hardships and proving the necessity of the loan modification.

In each case of loan modification the lender conducts a special test, also called a modification net value test in order to determine whether it's gainfully to perform a particular loan modification. The lender takes into consideration the expected cash flows that can be received in case of the loan modification (taking into account the new interest rate, the new loan term and other changed essentials). After that, the test compares the resulting sum of these cash inflows to the potential earnings in the case of loan foreclosure. In this instance, the lender should include in the potential costs calculation such expenditures as the costs of home repairs, real estate agent fees, legal fees for sales registration, discounts to sell the house in case of further price decline in real estate market and so on. In the end, if the calculated sum of the potential cash flows after the loan modification exceeds the returns from foreclosure, the lender gets profit from restructuring the at-risk loan and performing the mortgage modification.

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What Is a Loan Modification and Who Can Be Eligible for It

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In February 2009 the U.S. government adopted the so called Making Home Affordible Program, aimed to overcome the continuing crisis in the housing market. One of the main parts of this program was the loan modification plan.
According to this plan, a loan modification also called a mortgage modification or loan restructuring means a considerable change of the terms of a borrower's loan in case a borrower faces financial hardships and becomes unable to make his mortgage payments on time. In other words, the loan modification plan is designed to restructure troubled mortgages in such a way that house owners could stay afloat. The other goal of loan modification was to stop the decline in real estate market.

For this purpose, according to the loan modification plan, lenders should reduce monthly payments on distressed loans to such a level that they would amount no more than 38 percent of the gross family income. Next, the servicer should conduct the loan modification further, so that this ratio should not exceed 31 percent. In order to achieve such a result, the creditor first of all should lower the interest rate down to 2 percent. If this reduction is not enough, the loan term should be extended, it can be increased up to 40 years. If monthly payments still account for more than 31 per cent of the borrower's gross income, the lender may service the loan principal at no interest. However, it is important to note that for all these concessions, the actual amount of principal while carrying out the modification can not be reduced.

Now let's consider the basic provisions of the equity modification, you necessary need to know if you are the owner of a distressed mortgage.

The borrower is eligible for a loan modification if the following conditions take place:

1) A mortgaged house must be owner-occupied, or in other words, an owner must live in a mortgaged house. The loan modification program is designed to rescue house owners from foreclosure, but it doesn't distribute to the speculators who bought homes for resale or investment. The owner will need to prove this fact by official documents, for instance such as credit reports.

2) Modification concerns only those loans that were received before January 1, 2009. The other condition claims that unpaid loan amount shall not exceed 729 750 dollars.

3) The inability to pay the mortgage payments should be reasoned by actual or potential deterioration of a borrower's financial situation. Such reasons as the reduction of earned income, considerable extra expenditures (due to illness, divorce or other), growing bills and so on, can be mentioned. Financial difficulties should also be documentary verified. It is important to note that the loan modification program does not apply for those who can not pay the mortgage because of job loss or other reasons that led to the fact that you can not arrange monthly payments at all. Loan payments can be reviewed and reduced, but not canceled or postponed.

4) In accordance with the equity modification program, the minimum payment on the loan should be reduced to 31% of the borrower's before-tax income. This means that if the amount of monthly payments is currently less than this value, you can hardly claim to participate in the loan modification program.

To find out whether your loan meets these requirements, you can contact your lender with the application for participation in the program of the loan modification. Next, you will be required to describe in detail your financial situation and prove it by official documents. While the modification you should be ready to do a considerable paper work and prepare a great number of written documents. The lender will inspect the description of all your assets, information on all sources of the household income (before taxes), the last tax returns, the information about the second mortgage on the house, balances on all your credit cards and debts, the application for the loan modification describing all the reasons that led to your financial hardships and proving the necessity of the equity modification.

Also please find more details on my website about lbps loan modification and lbps mortgage.

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Loan Modification Lawyers - A Helping Hand to Homebuyers!

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Loan modification lawyers are heaven-sent for those who are behind their mortgage payments and are facing foreclosure. They act as a mediator between the individual and the bank, putting the client in the best situation to get his loan modified. But wait, what is a mortgage or a loan adaptation anyway?

Mortgage and loan modification for dimwit

To understand how a mortgage and a credit modification works, we must first understand what they mean.

A mortgage is a loan a home buyer gets to pay the seller for a piece of property. The prospective homeowner then owes the mortgage lender or in most cases, the bank, the total amount he borrowed plus the interest.

If the homeowner is not able to meet the agreed terms of payment, he or she is most likely to face a foreclosure where a bank will repossess his home. The home can be auctioned off and the profits that will be gained from that auction will be used to recover the bank's lost investment.

A loan adjustment, on the other hand, is a term used when banks adjust existing mortgage loans. Loan adjustment, also called "loan-mods," are accomplished through various programs depending on the individual's circumstances and finances.

These programs are sponsored by banks themselves or through programs of the government like the Home Affordable Modification Program (HAMP).

If the loan conversion is accepted into a program, the bank may agree on reducing monthly mortgage payments. It may also reduce the interest rates for as low as 2% of the portion of the loan until the whole payment is paid off.

So, why hire a Loan modification lawyer?

Borrowers usually have a hard time applying for loan alteration. The process drains them emotionally and physically. Bank representatives make them go to different departments and give different answers to basic questions. They demand applications, bank statements and pay-stubs. They don't only do this once-- they repeat the request over and over.

By the time you respond, the application has already expired and will need to be resubmitted. This process drags on for months and in some cases, even years. While this is happening, your foreclosure continues. Sometimes your applications can even get denied or lost-who wouldn't have a nervous breakdown?

Call an experienced loan modification attorney. They will help you understand the whole process and ease your burden. They will review your financial situation and discuss your possible options.

Loan modification attorneys know how to deal with banks and loan modifications. They will prepare your application, in the bank's desired format, to guarantee a speedy process. Loan modification lawyers will work through the numbers, and present your application in a good fashion. They will be able to use their know-how and experience in negotiating with the banks.

Once a loan modification lawyer accepts you as his client, he will provide an in-depth analysis and review.

Documents to be studied include: financial documents (pay stubs, bank statements, income, expenses), real estate taxes, insurance policies, and debt as opposed to your income. They will determine what your targeted monthly loan amount should be, based on your finances.

Once the application is submitted, the loan modification lawyers constantly follow up with the banks to ensure that the application of the client won't get "lost" or "misplaced".

Eventually the client application will be accepted and the bank will put him in a "trial" period. This period will let the client pay a lowered loan amount. After this trial period, the bank will permanently modify the loan to the new, reduced amount.

Loan modification attorneys will help save your home, plus help you afford your home payments.

Imelda is a real estate agent that knows loan modification attorneys and the great things about hiring loan modification lawyers

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