How do I know if I qualify to receive a principle reduction?
With the demand for principle reduction, homeowner(s) may feel like the investor(s) owe them a principle reduction. But the truth of the matter is the homeowner(s) have to go through two qualifying steps before they will be able to obtain a reduction in principle.
One of the most important components to the homeowner(s), we have seen, is a principle reduction. This may not always occur for the homeowner(s), but in many cases it does. A principle reduction is generated by the waterfall technique. The main objective is for the investor(s) to get the borrower(s) debt to income ratio (DTI) to a 38%. There are three steps that the investor will take within the waterfall technique. The first step is taking your interest rate and dropping it as low as 2%. This is the floor rate under the Fannie Mae and Feddie Mac guidelines. If the investor(s) has not got the borrower(s) to the 38%, then at that point the investor will extend the terms. An example of this would be taking a 30 year note and making it into a 40 year note. If they still have not achieved the initial goal of 38%, principle reduction will take place. On average, i-modified-it.com is seeing principle reductions that are between 20-25%. An example of this would be a loan that had a balance of $520,000, and was reduced down to $390,000. This was a principle reduction of 25% and a savings of $130,000.
Please visit www.i-modified-it.com for more information and to view recent loan modifications.
Please envision water falling down a waterfall from left to right then right to left. This is where they get the term, "waterfall technique."
Comments(4)