It is still freezing here in Chicago!
You want proof? Watch ESPN for tonight's Chicago Bears-Green Bay Packers football game, and note the steam rising from the field, and from the players on both sides.
While you're watching the game - say a prayer that the Bears will pull this one off tonight and keep their post-season hopes alive. Will ya?
Much has been said about Mortgage Loan Modification Programs, and their potential to make it easier for those in financial distress to keep their homes and fend off foreclosure. Have you heard?
Indeed, several large lenders - including Bank of America, J.P. Morgan Chase, Wells Fargo, and Citibank are considering more requests for Loan Mods than they ever have. Still, however, the process remains cumbersome, and not every loan modification request gets granted.
Often times, those with foresight - who attempt to contact their lender BEFORE they become delinquent in their loan - are less likely to receive modified loan terms than a borrower who is several months late, and approaching loan default. Why, lenders might think, should they give you easier-to-afford terms if you're keeping up with your payments anyway?
This might make good business sense at first, but does overlook the likelihood of a near-future default by a candid borrower.
To determine if a specific borrower would qualify for a modified mortgage loan, they look at their monthly house payment as a percentage of their total gross household income. It that house-payment-to-income ratio exceeds lender guidelines - typically, 31 to 41% for most lenders - a loan modification program is considered. However, if the ratio is lower and more favorable, the loan modification is more likely to be denied.
Of course, there are always mitigating circumstances. If the borrower has endured some sort of hardship - loss of a job, divorce, prolonged illness, physical disability, or the death of a spouse, the application for loan modification stands a better chance for approval. Most lenders require a written, signed "hardship letter" as part of your application.
To create a loan modification that is win-win for both parties, the bank aims to collect as much as possible of the original loan amount, while, at the same time, working out a payment schedule that the borrower is likely to keep current with.
Common loan modification programs may offer an extended period for principal payback (often as much as 40 years, rather than the original 30), a reduction in the interest rate, and a deferral of the principal payments due.
Very few loan modification programs offer actual principal reduction, or forgiveness of debt. For banks, giving back this actual equity is a very last resort - one often taken only in the more desperate situations of short sale or foreclosure.
Approval time varies, depending on one's individual financial situation. Some seeking loan modification are approved immediately; others must wait longer.
Check out the U.S. Department of Housing and Urban Development's website for more information on Mortgage Modification programs, as well as connections to a not-for-profit Mortgage Counselor who can help nervous borrowers successfully apply for a Loan Mod with their lender.
Our post today via BlogChicagoHomes.com provides more details, as well as a link to Marcie Geffner's article in last Sunday's Chicago Sun-Times.
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