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Dec312010

Loan Modification in Corona, CA: A Guide

Home values in Corona, Calif., have decreased significantly over the last few years. This has positioned many homeowners in a hopeless situation: their monthly loan payment is too high and selling the house isn't the answer because its value is less than the mortgage.
If you're in this predicament, you may have contemplated mortgage loan modification. Though loan mod is a potential solution for a few property owners, a short sale is often the better choice for cutting debt and increasing personal net worth. Home Sales and Loan Modification in Corona, CAHome Sales and Loan Modification in Corona, CA
In this guide, I'll explain loan modification in Corona, debunk a number of widespread myths and help you decide if short sale is a better option for you.

What is Loan Mod?

A loan modification is a reconfiguration of the terms of the loan, which can include lowering the loan's interest rate or stretching out the term (number of payments) in the hopes of lessening the homeowner's payments.
While many Corona loan providers will extend a mortgage to 40 years, it’s important to note that most interest rate reductions are short-term. Their logic is that the country's economy will ultimately get better, allowing them to subsequently resume the payments at the formerly higher rate.

Myths and Realities of Loan Mod in Corona, Calif.

There are many myths about loan modification. In this section, I'll uncover a couple of the most prevalent myths.
  • Myth: With loan modification, there is also forgiveness of built up penalties, fees and interest on any missed payments.
  • Reality: Banks are opting to include the built up penalties, fees and interest from the missed payments with the loan debt.
  • Myth: Payments will go down with a loan mod.
  • Reality: In a significant number of Corona, California loan modification cases, payments actually increase because the accrued penalties, fees and interest on missed payments are added to the loan. To help the restructured payments seem helpful, lenders are stretching the loan term to 40 years. A number may provide slight discounts in the rate for two to five years. Yet, in more than a third of loan mod cases, the payments may end up being higher than before the loan mod, as per the Fitch Bank Rating Agency. 
  • Myth: The principal balance will be lowered in a loan modification.
  • Reality: Reductions to the principal balance happen only in exceptional situations, such as when elaborate legal or financial difficulties are being negotiated or litigated with the mortgage company.
Based on the realities of mortgage loan modification, short sale is frequently the best option for Corona, Calif., homeowners looking to free themselves from debt and build personal net worth.

Quick Tip

Loan mod is not the same as a forbearance agreement, which is a restructuring of the back payments owed without making any changes to the original terms and conditions of the loan. Payments go up with forbearance agreements because the back payments are paid in the future.

How to Obtain a Loan Mod in Corona, CA

Some of the most common methods for pursuing a loan mod in Corona include:
  1. Applying directly with the lender. This is the course of action preferred by lenders because most homeowners are unable to work out considerable reductions to the interest rate and debt.
  2. Working with a Corona, CA loan modification company. These companies are usually attorney- or real estate broker-owned companies. Loan mod companies are very skilled and can have success in addressing legal challenges in order to obtain preferred interest rates and debt reductions. However, it should be noted that the effectiveness in this segment is unsatisfactory overall for most homeowners.
  3. Working with a skilled California short sale real estate investor or negotiator. Although this may sound peculiar, this is actually a very sound option, primarily if home affordability is an issue. Because lenders often determine that a short sale will result in greater losses than loan modification, the mere probability that a homeowner is giving up may cause them to make their most beneficial and final loan mod offer. This approach can be used initially, but is frequently used when the borrower is stretched to the limits financially and unable to get a satisfactory loan modification.

Loan Mod Eligibility in Corona, Calif.

Officially, there's no qualifications requirement for obtaining a mortgage loan modification in Corona, CA, although the loan provider and borrower will have to be able to reach an agreement on the change to the loan. There are situations in which a California lender will be more inclined to agree to a loan modification and others in which the lender is less likely to grant approval. In general, loan mod is more likely to be granted when:
  1. The homeowner has a difficulty or hardship that has been remedied or is resolvable before long.
  2. The approval of a long-term loan mod is absolutely needed to make the non-performing loan turn into a permanently performing loan again. 
Approval of a trial loan mod can be acquired in nearly all situations. To participate in a trial mortgage loan modification in Corona, lenders generally require the borrower to make monthly payments at an agreed upon amount for at least 90 days before granting permanent approval. Regrettably, this results in a trap for some borrowers because the lender might never provide permanent approval of the loan modification. 

Loan Mod Deal Breakers

1 . The bank decides that the borrower can't afford the home.
2 . The loan provider does not agree that a borrower's problem is resolvable by loan mod.
3 . The lender concludes that the borrower might make the loan payments whether or not the mortgage lender provides prolonged approval. For example, if the mortgage company believes that the borrower wants to keep the property regardless of the circumstances, the loan provider doesn’t have any incentive to grant approval.

Most Loan Modifications are Destined to Fail

A typical loan modification payment is 64% of pre-tax earnings, according to the Fitch Bank Rating Agency. In contrast, lenders typically do not approve a new loan if the payments exceed 35% of pre-tax income since they know that for a loan to achieve success and avoid becoming a non-performing loan, borrowers should be able to budget a good potion of their income for other household essentials.
This incredibly high payment condition makes loan mod an unworkable plan destined to fail, according to Fitch and others. In their assessment, Fitch has been critical of the banks’ managing of loan modifications, because of the low approval rate of long-term loan modifications and the subsequently high failure rate of loan modifications after long-term approval is given.
Unfortunately, federal and California Loan mod laws have been powerless to force lenders to do more to help property owners reduce foreclosure, because of their inability to push banks into absorbing more of the monetary losses that are caused by the housing crisis.

Is Loan Modification Right for You?

Due to the substantial drop in real estate values, loan mods usually are not advisable for the majority of Corona property owners. If you're concerned with reducing your debts and expenses, a short sale can help you achieve these goals while also increasing personal net worth. 
Furthermore, if you require a loan modification in Corona, CA, yet possess little if any equity, a short sale can be employed as a strategy to get your bank to make an acceptable loan modification offer.
For additional info on California loan modification and short sale, download and read my free ebook, “Loan Mods, Why Short Sale May be a Better option for you,” or phone me at 1-888-REHelp9.

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Reader Comments (1)

Excellent post.I want to thank you for this informative read, I really appreciate sharing this great post. Keep up your work. Fast loans are primarily secured and customer's credit will not be checked prior to disbursement of the loan, the lender may conduct preliminary checks to avoid future standards. The borrower Settlement Loan may be asked to provide proof of identity such as a driver's license or passport. It is a guarantee, an additional criterion to ensure the repayment capacity.

November 15, 2011 | Unregistered CommenterJessica14

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