Frequently Asked Questions
What is a loan modification?
Why are lenders willing to negotiate?
What are the benefits of a loan modification?
What qualifies a homeowner for a loan modification?
Do I need good credit to qualify?
Can I negotiate a loan mod myself?
Then, Why should I hire Sound Method Modifications?
What is a Loan Modification?
A loan modification is a temporary or permanent change to your loan to lower your monthly payments. Lenders can do this in a variety of ways: lower the interest rate, extend the amortization term, defer or forgive a portion of the loan balance, or any combination of the above. The goal is to make your monthly payments affordable. A loan mod also won’t show up on your credit report. In fact, it might save your credit rating by preventing you from falling behind in the first place.
Why are Lenders Willing to Negotiate?
Lenders don’t want to foreclose unless they have no other choice; they usually lose more money by selling your house than by lowering the payments. Foreclosure is costly for lenders because they must spent money to evict you, rehabilitate and maintain the house, hire a listing agent, appraise and insure the house, then let it sit on the market for months instead of collecting mortgage payments. House values have dropped so much in the last two years that lenders may not even be able to recover the full amount of the remaining loan balance by selling the house. It makes more sense for them to let you keep the house and continue making payments, so they can recoup the full amount of your loan when you refinance or sell the house after the market improves.
What are the Benefits of a Loan Modification?
- Lower your monthly mortgage payments to fit your budget
- Keep your house and avoid foreclosure
- Preserve your credit score
- Preserve your neighborhood's house values
- Potentially eliminate mortgage-related late fees and past due balances
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What Qualifies a Homeowner for a Loan Modification?
- Financial hardship, which comes in many forms including:
- Shorter work hours, pay cuts, reduced commissions or reduced sales
- Loss of income due to death in the family, divorce, illness or unemployment
- Unexpected expenses
- Out of control debt
- An ARM (adjustable-rate mortgage) about to adjust to a higher interest rate
- Increasing mortgage payments due to negative amortization
Do I Need Good Credit to Qualify?
Credit is not a factor! Lenders only look at your credit score to determine whether or not to lend you money. When applying for a loan modification, however, credit is no longer a concern. Your lender only wants to assess whether you can reliably make payments at a lowered rate. If they're convinced that it's in their best interest to modify your loan, then they will. That’s why it’s so important to make a strong case to them.
Can I Negotiate a Loan Mod Myself?
Yes, you can. However, most people have never been through the loan modification process before. They don’t know who to contact, how to present their situation to the bank, how big of a modification to ask for, or how much negotiating room they really have. People are often intimidated by the complexity of the process, or brushed aside because the banks are overwhelmed with loan mod requests. Always remember that your lender is looking for a way to mitigate their losses; they will only offer you enough of a modification to keep you paying... unless you can show them reason to do so otherwise.
Then, Why Should I Hire Sound Method Modifications?
We have 28 years combined experience in the mortgage industry from our executive staff alone helping borrowers like you keep their homes. We accompany you during every step of the process, from providing you with contact information for your lenders to sitting down with you to fully understand your current situation. We pre-underwrite the file and propose to the lender what should be done to fix the situation, in a way that shows them how it's mutually beneficial. We present them with a complete, professional package that includes:
- A letter written by a published writer explaining your hardship and its financial impact
- A breakdown of your finances that highlights how a lower mortgage payment can help you get back on your feet and stay current
- Different ways the lender can modify the loan terms to make the loan more affordable for you
- All supporting documentation, so your lenders can spend more time reviewing your case instead of requesting missing documents
- ... and more!
What's priceless is the peace of mind we can provide. You'll have confidence that you've enlisted a friendly and aggressive ally to help secure the best possible terms.
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Non-profit & Government Resources
HUD.gov
U.S. Department of Housing and Urban Development
HopeNow.com
Support and Guidance for Homeowners
DFI.WA.gov
Washington State Department of Financial Institutions