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Loan Modifications Going Paperless

Paperless Loan Modifications?

Paperless Loan Modifications?

Orange County, CA – Loan modifications may be getting easier for some. Later in the year, we are likely to see an excellent opportunity for homeowners who are struggling to keep up with their mortgage payments. Many people in this position may be able to take advantage of a new program which will allow for modification of their mortgage to reduce monthly payments without having to show their financial documents to their lender.

This coming July, the Federal Housing Finance Agency will instruct servicers to provide streamlined loan modifications to borrowers with Freddie Mac and Fannie Mae. As with similar programs, there are specific requirements that must be met before eligibility kicks in.

Borrowers will need to be at least 90 days delinquent, but no more than 2 years. Second, they will need to have a mortgage which was taken out more than a year ago. Finally, borrowers must owe at least 80% of the current market value.

Borrowers who qualify and wish to take advantage of this opportunity will receive letters which will indicate their new payment plan. This plan will be based on an extended repayment term of 40 years at around 4%. This should reduce payments by about 30%. New users will be subjected to a three month trial period. This new payment plan will become permanent as long as the borrower makes three payments in the first three months. For the borrower to accept the offer from the FHFA, all they have to do is to notify their servicers by telephone that they would like to accept the offer and will be making the first payment by the due date.

One thing to note though is that the FHFA has indicated that accumulated late payments will not be waived. Instead, the balance from the previous agreement, including past due payments, will be added on to loan. Despite this, most monthly costs will be reduced, given that the mortgage is spread over a much longer term.

There is a strong likelihood that borrowers who owe more than 115% of the value of their property will have a forbearance on part of their loan balance. A forbearance allows a borrower to make a payment plan to bring them current in lieu of the lender foreclosing on the property. In this case, the repayment plan will be without interest and will last until the end of the term or until the point at which the house is sold.

This seems like a great option for those who meet the specifications and are struggling with their repayment plan. But there are other options. You may qualify for one of the refinance programs available to struggling homeowners. That could work just as well, so make sure you speak to us about your specific situation. Let us see if we can help you and your family going forward.

Scott Storace

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