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What is a loan modification?
A loan modification is when a borrower who is facing financial hardship and is having difficulty making their mortgage payments works with their lender to change the terms of their mortgage loan. This could include interest rate, principal balance, or length of term. The goal of the new government backed program is to standardize the process and reduce monthly payments to under 31% of their debt-to-income.
Who is eligible for a loan modification?
According to the Department of Treasury “Anyone with high combined mortgage debt compared to income or who is “underwater” (with a combined mortgage balance higher than the current market value of his house) may be eligible for a loan modification. This initiative will also include borrowers who show other indications of being at risk of default. Eligibility for the program will sunset at the end of three years.”
What is the next step?
If you think you might qualify for a loan modification under the new government program you should contact your lender and tell them you are interested in a loan modification.
What is a Loan Modification