A loan modification can result in an adjustment to the terms of a mortgage. Those who are considering this strategy likely have the following questions:
Who can benefit from a loan modification?
A homeowner who wishes to stay within their home but is having difficulty meeting the financial obligation may want to consider a loan modification. In some cases, this option can replace a foreclosure or shape short sale.
The options for the loan modification can vary depending on your situation and your lender. Some examples can include and a lengthening of the loan repayment period as well as a temporary pause on payments. This is not to be confused with refinancing. Refinancing is replacing your current mortgage with a new phone. Loan modification is changing the terms of an existing loan.
How do homeowners qualify for a loan modification plan?
In most cases, a financial institution will require the homeowner provide a proof of hardship letter, completed application and additional supporting documents like pay stubs. The proof of hardship letter will generally outline what life event has resulted in the homeowner’s current financial hardship. Examples could include job loss or change in health.
Does it matter where you live?
Although home loan modifications are generally available throughout the nation, state law can govern certain aspects of this practice. The Florida Office of Financial Regulation is monitoring these transactions. The agency states that financial institutions offering home loan modifications must be properly licensed with the state. As a result, the state is regulating these transactions. This can provide additional protection for homeowners by reducing the risk of fraud.
Florida law also requires that these financial institutions not begin charging a fee until the applicant has begun benefiting from a loan modification.
It is important to note that a loan modification is just one option for those who are struggling to meet their loan payments. Other options may be available depending on the details off you our situation.