No one wants to admit that he or she may be struggling with bills and paying necessary expenses, including their mortgage. However, circumstances may arise that make it extremely difficult for an individual to make payments in accordance with the terms of an existing mortgage or other real estate loan. In these instances, a loan modification may provide some relief to a struggling borrower.
A loan modification occurs when the lender and borrower reach an agreement to amend (i.e., modify) the terms of an existing loan, thereby creating a new loan agreement between the two parties. In practice, the vast majority of the original loan’s terms and conditions are carried over into the new agreement. However, one or more elements of the underlying loan are “tweaked” so as to provide a tangible benefit to the buyer.
Potential Benefits of a Loan Modification
Some practical benefits that borrowers may receive as a result of loan modifications include the following:
- A reduction in the loan’s interest rate
- A reduction in the amount of principal
- A reduction in late fees and/or other penalties
- An extension in the length of the loan
Properly-modified loans can allow borrowers to stay in their homes and away from foreclosure proceedings.
Communication is Crucial When Seeking a Real Estate Loan Modification
If you anticipate that continued compliance with the terms of your current mortgage or other real estate loan will create an extreme financial hardship – or if you are already in noncompliance, it is very important to remain in close communication with your lender. Preferably before things become too bad.
Only when you work with your lender will you be able to seek relief through a loan modification. At the same time, the process may be daunting, and you may experience some pushback from the lender. Therefore, hiring experienced legal counsel is always advisable in these instances. You will need to provide extensive documentation and affidavits; and a legal team representing your interests can help.
A Loan Modification is Not Always Guaranteed
It is important to note that despite a borrower’s heartfelt desire to obtain a modification of a mortgage or other real estate loan, it is not always feasible from the lender’s point of view, nor are they required by law to modify a loan.
Lenders generally take into consideration a few primary factors when determining whether to modify existing loans:
- The current status of a borrower’s loans, especially any delinquencies, and the likelihood of the borrower becoming delinquent on the loan at issue in the near future
- The degree of financial and economic hardship experienced by the borrower
- The debt-to-income ratio of the borrower (which may not always be straightforward).
For these reasons and more, it is important to contact our office today to help.
Blado Kiger Bolan, P.S. – Experienced and Skilled Banking and Lending Lawyers. Contact Us Today
Blado Kiger Bolan, P.S. has over 40 years of combined experience in advising banks, lenders, and homeowners in Washington State. We pledge to provide you with the best representation possible regarding the loan modification process. For assistance with a loan modification, contact us on the web, or call our Tacoma office at 253-272-2997.