Much has been written about Loan Modifications. The reality is that even after all the press about this subject many in the general population do not fully grasp what a Loan Modification is. Notwithstanding popular belief, banks are not under any legal obligation to complete a Loan Modification.
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What is a Repayment Plan/Loan Modification?
Also known as a Loan Modification Plan, a Repayment Plan is designed to reinstate the loan and refers to changing the terms of the original mortgage. It is an agreement between the property (home) owner and the Lender to bring the mortgage current over time. It is extremely difficult to describe a standard Loan Modification Plan – Repayment Plan as no two circumstances are exactly the same.
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Example of Loan Modification by Legal Settlement
Recently, Countrywide Home Loans, pursuant to a legal settlement agreement with the Illinois Attorney General has allowed for some standardized Loan Modifications. In exchange for not going to trial on the potential claims that the Illinois Attorney General may have brought against Countrywide Home Loans, a settlement was reached whereby certain numbers fo the Borrowers are to be offered a modification of the terms of the loan to a fixed rate.
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What Could A Loan Modification Look Like?
Prior to the current financial crises the terms of a Loan Modification – Repayment Plan commonly provided for a payment of ½ of the arrearage (back payments) as a down payment and 1 ½ payments a month until the account is brought current. In the current market environment, provided the Loan Modification – Repayment Plan is properly presented to the Lender, a far better outcome is secured for our Clients which in the recent past have included:
1. Reduced Monthly Payment
2. Reduced Interest Rate
3. Fixed Interest Rate: 30 Years to 40 Years Amortization
4. Reduced Principal
5. Adding back payments to the principal
6. Extending the term of the mortgage
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