What are some of the risks associated with Loan Modifications?
The terms that you agreed on during prior loan modifications may no longer seem suitable if the rate adjusts at the end of the principal reduction period. Monthly fees will go up when there is an increase in the interest rate, even if it seems as minor as 1 percent. Unless your financial circumstances can accommodate these changes, you may be forced to forfeit certain benefits agreed upon in the original modification. You must understand the serious consequences of defaulting on a modification loan and find out the best way to ensure you stay current.
What if I can’t keep up with payments?
Avoiding foreclosure is at the forefront of your priorities if you are not in good standing with a modified loan. At the point that you have a late or missed payment, any benefits that you’re relying on may not even be available. This includes reinstating a principal reduction to lower the monthly payments while in compliance with the loan modification terms. If you do not want to stay in the home, you could pursue the option of a deed-in-lieu or a short sale instead. No matter what you intend to do, getting in contact with the lender to find out your options is the smartest thing to do if you have missed a payment or expect to this month.
How will my credit score be affected?
Lenders are responsible for clearly stating the terms of the modification at the time that you make the agreement. A single late payment can result in a bad mark on your credit report, and this was very likely outlined in the contract you signed. As late fees add up and you are still unable to pay, the financial consequences may include progressive credit score damage and the potential to lose the home in foreclosure.
What options do I have?
If you did not plan ahead to increase the amount you pay each month at the end of the reduction period, it might not be too late to work things out. The responsible thing to do when faced with financial hardships is to take action to settle the issues. Failing to make the minimum payment within 30 days of the due date generally results in an immediate reporting, regardless of the reason.
Give us a call to schedule an appointment so that we can advise you on budget adjustments and re-evaluating your financial circumstances. There may still be options if you simply cannot make a payment even after eliminating unnecessary expenses.