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Loan Modification
A Loan modification is the altering of one or more of the caracteristics of loan and/or its terms due to the inability to make payments in the agreed upon time-frame, or because the property is worth less than the borrower owes. The idea behind of the loan modification is to design the amount of the payment to a level where the borrower can consistenly make his/her mortgage payments as well as pay his/her other bills.
Short Sale
A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for.
Short sales are a way for the homeowners to avoid foreclosure on their homes and still be able to pay of their loan by setting with the lender.
The biggest propblem with this option is getting the new buyer to qualify for a loan and the time frame it takes,
Deed in Lieu of Foreclosure
This option releases the mortgagor from all debts associated with his mortgage. A mortgagor is eligible for this if and only if his property has been on the market at its fair market price, for more than 90 days.
In that case, and with the approval of the lender, the mortgagor can transfer their property to the lender and be relieved of his indebtedness.
This step will not save the home, however it can save the person from the notoriety and pain of foreclosure.
Repayment Plan
A repayment plan is worked out by the lender so the homeowner can get caught up on payments.
A repayment plan will allow the homeowner to repay the past due amount over a specified perido of time.
Special Forearance
The homeowner may be able to suspend or reduce his/her mortgage payments for a short period of time.
Refinance
When refinancing the mortgagor lowers their monthly mortgage payments by taking out a new loan in the place of the old one.
This is very difficult now because of the drop in values and the tightening of credit by the lenders.
Modification vs. Refinance
In the current credit enviroment, refinancing is very difficult. Typically, homeowners must prove they have excellent credit, job security, disposable income, and the capacity to pay a large mortgage.
Lenders have eliminated programs for less qualified and sub-prime borrowers, so homeowners that have fallen behind on their mortgage or owe more than their house is worth, face even more difficult time trying to refinance.
Refinance is when someone applies for a new mortgage. During a refinance, the home would undergo a new appraisal and the owner's credit file will be re-evaluated. A title report will also be required. All this incurs addional cost.
Mortgage modifications cost are minimal becuase it is simply working with the loan they already have,
If the homeowner is more than three months behind on payments, they will be required to pay nay atorney fees that have been incurred, and possibilty a payment or two to show good faith.
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