With Phoenix AZ real estate prices dropping, unemployment fears rising many Phoenix AZ homeowners are facing a tough decision.
Borrowers are asking themselves, if they should continue to deplete long-term savings and pay their mortgage. A very scary question to ponder.
A new option as emerged at the forefront of those facing foreclosure. It is called a loan modification.
A loan modification is a permanent change in one or more of the terms of a mortgagors loan which allows the loan to be reinstated and results in payment the mortgagor can afford.
Loan modifications typically involve a reduction in the interest rate on the loan, a fixed rate mortgage vs. adjustable rate mortgage (ARM), the term of the loan, principal, interest and fees (the arrears ) added to the loan balance to bring you current. A loan modification can consist of any and or all of the above
Fannie Mae and Freddie Mac had announced a plan to Suspend Foreclosures Until January 2009 While Streamlined Modification Program is Implemented. Fannie Mae, Freddie Mac, Bank America and Chase Bank have all suspended foreclosures in most of the country for several months until they can establish loan modification departments to handle the massive amounts of borrowers requesting to modify their loans, avoid foreclosure and stay in their homes.
Fannie Mae and Freddie Mac , alone, expect to modify loans of more than 400,000 borrowers. I am not in the loan modification business. However,
I have advised struggling Phoenix AZ real estate owners to speak with an attorney and their bank to decide if a loan modification is right for them.
I wanted to share a story.
A borrower, who is now almost 6 months behind on their payments for about $10,000 solicited the help of a Phoenix AZ loan modification company, who for a small fee has worked to negotiate a loan modification for the borrower.
The original terms where a 6 month forbearance. In the context of a mortgage process, forbearance is a special agreement between the lender and the borrower in order to delay a foreclosure. In this situation, the bank would request 20% of the monies past due “Arrears” paid immediately and then a fixed payment of 80% of the current loan amount for six months.
The client came back to the bank with an offer of $1,000 now and a 6 month payment of $1,300/month. The bank accepted. In 6 months, if the client is paying on-time, the bank will review the current financial health of the borrower and offer a permanent loan modification.
Everyone is happy. Banks keep a client paying interest, prevent foreclosure and most importantly, the borrower avoid foreclosure and is home for the holiday.
If you are considering a loan modification please ask for a referral of a loan modification company that has been successful for borrowers.
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