When dealing with loan modifications to Prevent Foreclosure, a common misconception is that “What works for one, works for all”. Each case is different and must not be compared to any other situation. There are hundreds of companies out there promising the moon; the home owners will be the victim of them.

Lenders are calling home owners that are about to adjust and telling them they can POSSIBLY reduce their rate. These are telemarketers from the lenders who just make the calls, gather info and pass it along. It does not mean that the home owner has been offered any type of modification.

If the loan was obtained within one year ago, it is not usually possible to do a modification. A lender wants to see close to two years or more (depending on lender) with some good history. If a home owner had a bad paying record in this time frame, the lender will not be as willing to go towards a modification.

If a home owner has a thirty year fixed loan at 7.75% and tells you they want their rate lowered because they cannot afford it, a lender is not going to adjust an interest rate just because the homeowner over-extended themselves with other debt or signing for a loan they knew they could not afford.

The mortgage payment must be the hardship in regards to a rate reduction. If the home owner has $1,500 in monthly credit card payments, this would not be a hardship that the lender would accept towards lowering their payment. The home mortgage must be the issue.

If the home owner signed a mortgage at a very high interest rate knowing they cannot afford the payment, this is not an issue for the lender. They are not going to automatically lower the home owner’s rate. They must have good payment history with lender first. It does not matter what their mortgage broker or their Realtor told them. This is not a reason for a rate reduction.

If the home owner has a fixed rate loan with a high interest rate, but has had the loan two years or more with GOOD paying history, their lender may work on getting the interest rate and payments lowered.
Jim Hutchinson
Certified Loss Mitigation Consultant
Freedom Foreclosure Prevention Services