US bank Loan Modification. who Qualifies for a Loan Modification

US bank loan modification has been a lifesaver to some people and has come in handy for most people at some point. US bank loan modification works in a really easy way but you need to have full knowledge of how it works to be able to use it effectively. Let’s get right in.

What is Loan Modification

A loan modification can relieve some of the financial pressure you feel by lowering your monthly payments and stopping collection activity.

Loan modifications are most common for secured loans, such as mortgages, but you may also be able to modify other types of loans. That could include personal loans or student loans.

But loan modifications are not foolproof. They could increase the cost of your loan and add derogatory remarks to your credit report.

That doesn’t mean you should avoid a loan modification. But before you jump at the chance, consider all the angles.

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How does a Loan Modification Work?

Getting a loan modification could mean extending the length of your term, lowering your interest rate, or changing from an adjustable-rate mortgage to a fixed-rate loan.

Though the terms of your modification are up to the lender, the outcome is lower, more affordable monthly mortgage payments.

Foreclosure is a costly process for lenders, so many are willing to consider loan modification as a way to avoid it.

U.S. Bank posted its second-quarter earnings on Wednesday, showing the bank’s rapid response to assisting its customers and clients as they handle the impact of COVID-19.

According to the earnings report, to date, nearly 130,000 U.S. Bank accounts and over $17.2 billion in loans have been modified through forbearance programs, as the bank worked to support customers through “these extreme economic times.”

U.S. Bank also cited residential mortgages as one of the biggest drivers behind its 10% growth in average total loans for the second quarter of 2020.

Given that U.S. Bank is the tenth largest mortgage lender in the nation and the surge in mortgage applications during the last quarter, it’s no surprise that residential mortgages increased 6.4% from last year.

Options for Retaining your home

It offers several options that could help you retain your home. To determine which might best suit your needs, please review the following:

Repayment plan

A repayment plan allows you to pay your regular monthly payment plus additional funds applied to past-due amounts. Payments are distributed over an agreed-upon period of time.

This option may work for you if:

You can afford your regular monthly payments and other expenses.
You have surplus funds at the end of the month.

Hardship loan modification

This option allows you to roll interest and escrow shortage from delinquent payments into the existing loan. You may qualify for an interest-rate reduction to have the term of the loan extended.

This option may work for you if:

You can afford your regular monthly payment or a slight increase in your payment, plus other monthly expenses.
You don’t have substantial funds left at the end of the month.

Options Regarding Selling your Home

If you face the possibility of selling your home, ask yourself the following before starting the process:

Are you prepared to sell your home?
Are you unable to recover from a situation that caused you to fall behind on your mortgage payments?
Are you unable to afford your regular monthly payment and have no means to catch up on delinquent payments?

If you decide to sell your home, consider the following options.

Short sale

In a short sale, the lender agrees to discount the loan balance due to hardship. The home is sold but proceeds fall short of the balance owed.

This option may work for you if:

You can’t afford your regular monthly payment and expenses.
You are interested in selling your home, which is worth less than you owe.

Deed in lieu of foreclosure

This option allows you to deed your home back to your lender or investor instead of facing foreclosure.

This option may work for you if:

You can’t afford your regular monthly payment or a slight increase in your payment, plus other monthly expenses.
You don’t have substantial funds left at the end of the month.

Who Qualifies for a Loan Modification?

Not everyone struggling to make a mortgage payment can qualify for a loan modification.

In general, homeowners must either be delinquent or face imminent default, meaning they’re not delinquent yet, but there’s a high probability they will be.

Reasons for imminent default include the loss of a job, loss of a spouse, a disability, or an illness that has affected your ability to repay your mortgage on the original loan terms.

The Types of Loan Modification Programs

Some lenders and servicers offer their own loan modification programs, and the changes they make to your terms may be either temporary or permanent.

If your lender or servicer doesn’t have a program of its own, ask if you are eligible for any other assistance programs that can help you modify or even refinance your mortgage.

The federal government previously offered the Home Affordable Modification Program, but it expired at the end of 2016. Now, Fannie Mae and Freddie Mac have a foreclosure-prevention program, called the Flex Modification program, which went into effect on Oct. 1, 2017. If your mortgage is owned or guaranteed by either Fannie or Freddie, you may be eligible for this program.

The federal Home Affordable Refinance Program, or HARP, helped underwater homeowners refinance into a more affordable mortgage. HARP has also expired. Fannie Mae’s High Loan-to-Value Refinance Option and Freddie Mac’s Enhanced Relief Refinance replaced HARP in 2019.

What Are the Benefits of Loan Modification?

Loan modification can change one or more of the terms of your loan to provide relief if you are financially stressed by the coronavirus pandemic or otherwise. Modifications can include:

Reducing your interest rate
Changing a variable interest rate to a fixed one
Extending the term length

The extended loan term compensates the lender for the reduced interest rate or payment. So your 30-year mortgage might become a 40-year one, Broeker says.

What Are the Benefits of Loan Modification?

But in exchange you’ll get:

A reduced payment. If you can reduce your monthly payment, it could be just the relief you need to pull through tough times.

A chance to keep your home. Banks prefer to avoid foreclosure because it’s an expensive process. The best outcome for the homeowner and the bank is a loan modification to make continued payments possible.

What Are the Setbacks of a Loan Modification?

Most people have noticed a series of setbacks with a loan modification. A loan modification can be an expensive lifeline. Keep these drawbacks in mind before you commit:

Your loan will likely cost you more in the long run. Adding years to your loan might mean paying more in interest over the life of the loan.

Your loan modification may be stressful. Some say the loan modification process can be a bit time-consuming and frustrating in terms of gathering all you’ll need to apply.

You’ll need to gather documents, such as recent pay stubs, bank statements, and tax returns, and complete an income vs. expenses worksheet, You’ll also have to write a hardship statement explaining your need for a loan modification.

Most of this information is fairly straightforward, but getting it together can be tedious. You may also have a trial period before the modification is approved.

Chase doesn’t let anyone get into a modification until they’ve proven for three months that they can make that newly lowered payment.

Be sure to ask questions about the terms and fine print because all lenders are different.

At this point, I believe this article has been helpful and informed enough about the US bank loan modification, how it works, its benefits, types of loan you could choose, and every setback involved in the loan modification.

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