In its most basic form, a loan modification is a reinstatement of your current loan with slightly modified terms. The most common loan modification is where the bank takes all the payments you missed and tacks those payments onto the end of the loan. Other modifications can include a change in the interest rate, increase or decrease in the principal, change in the monthly payment, etc. Regardless of the terms of a proposed loan modification, one thing all loan modifications have in common is that they keep you in your home.
A common question we receive from our clients is “do I qualify for a loan modification”? Whether or not you qualify for a loan modification depends on a variety of factors. I generally like to break these factors down into three distinct categories: (1) you; (2) the home; and (3) the loan.
- YOU: The bank will look at traditional lending qualifications such as income, credit score, debt ratio, other debts, assets, etc.
- THE HOME: The bank will sometimes complete a full appraisal on the home. However, banks normally do not conduct a full appraisal for a loan modification. Instead, banks normally rely on a BPO (AKA Broker Price Opinion), which is basically a drive by inspection of the home. When I say “drive by”, I literally mean just that, the broker drives by in his car, looks at comparable homes and then will come up with a value. The value of the home is relevant because this is how the bank determines whether or not the loan modification would meet the minimum loan-to-value threshold.
- The Loan: After handling thousands upon thousands of loan modifications and foreclosure cases, I can tell you that the type of loan and the banks and/or servicers involved in the loan are the single most important factors in determining whether you will qualify for a loan modification. By way of example, loans backed by the federal government such as loans from HUD, FHA, VA, etc., are generally easier to obtain loan modifications than non-federally insured loans.
For those of you who have tried to obtain loan modifications and failed, it is important to remember that simply because the bank declined your first application does not mean that all is lost. Persistence pays off. I’ve had clients that were declined four times before finally receiving a loan modification offer on their fifth loan application. This is where an experienced Florida lawyer can really help in guiding you through the loan modification process. Based on the type of loan and the bank involved, we know what information to include on the loan modification application, what documents the bank will require, and when is the best time to submit your loan modification application.
We are here to help, call us now at 813-683-8688 for your free consultation.