Q & A: What is a mortgage loan modification? (and how can it help you?)

The tumultuous housing market has created a feeling of uncertainty for many of today’s homeowners.
Figuring out the available options can be a daunting task, which oftentimes leads to more questions than answers.
With many people out there looking for useful information, help isn’t always readily available.
Duc Nguyen, a financial expert from Arizona and co-author of “Loan Modification Exposed — How to Negotiate With Your Lender and Win,” will be in Seattle June 26 and 27 to conduct free seminars (in English and Vietnamese)  that answer those difficult questions.

NWAW: What is a loan modification?
NGUYEN: A mortgage loan modification is an adjustment to the terms of a mortgage loan, resulting in more favorable payment conditions for the borrower. Modifications are intended to help homeowners keep their primary residence and avoid current or foreseeable foreclosure due to financial hardship.
On March 4, the U.S. Department of Treasury released the Homeowner Affordability and Stability Plan (“Making Home Affordable”) … [it] includes the Home Affordable Modification Program, detailing new, overriding, guidelines for loan modifications.
A loan modification isn’t going to work for everyone, but the ultimate goal is to keep qualified homeowners in their homes, in order to mitigate the loss that would otherwise be felt by both parties via foreclosure.
How do I know if I’m a good candidate for a loan modification?
Loan modifications are intended to help homeowners at risk, such as those suffering from serious financial hardship, decreased income, or increases in expenses. Homeowners who have a high mortgage debt relative to income, or are likely to default on their loan make good candidates.
If your debt-to-income ratio is above 31 percent, you are likely to be a good candidate for a loan modification. (Debt-to-income can be calculated by dividing your house payment by your gross monthly income.)

What makes it different from a refinance?
There are many differences between a refinance and a modification. A refinance is intended to help a borrower with a relatively good credit score, who isn’t behind on their payments, and will improve the long-term affordability of their loan by reducing the interest rate. There are regular fees associated with a refinance.
A modification is intended to help a borrower regardless of credit score, who is either facing or has defaulted on their loan. A loan modification requires change to the interest rate, term, and principal forbearance until a target debt-to-income ratio is achieved. There are typically no costs associated with loan modifications.

In what ways would a loan modification benefit me?
A loan modification will save you money by making your house payments affordable. This can potentially include a combination of lower interest rate, term, and principal forbearance. This allows you to sustain on-time monthly payments and lower your risk of defaulting on the loan.

Do I have to pay to do a loan modification? If so, what are the costs?
A loan modification doesn’t cost money. Homeowners can contact their lender directly for help. However, lenders are there to protect their own interest, not yours. There are certain homeowner rights suggested in the recent Home Affordable Modification Program proposed by the Obama administration.
But a homeowner must know about these in order to use them for negotiating purposes, especially since they are working against trained professionals.
There are nonprofit organizations that can help you with no charge. People also have the option to pay lawyers or mortgage professionals to apply for a loan modification for them.
I would like to educate homeowners on an affordable, comprehensive, do-it-yourself option that would maximize your chances of getting a loan modification with the best offer allowed by law, for mortgage relief.

Who should attend the upcoming seminar?
Every homeowner, whether they are behind or not. There might be rights that can benefit you, that will be revealed.
We will also be going over four must-know principles to putting a proposal together that your lender can’t say “no” to, floor interest rates, principal reduction eligibility, the loan modification guidelines for Making Home Affordable introduced by President Obama in March 2009, and more. 

Nguyen’s free seminar will be held at:
The Filipino Community Center
5740 Martin Luther King Jr. Way S., Seattle.
Friday, June 26, 6:30 p.m.–8:30 p.m. (in Vietnamese)
Saturday, June 27, 10:30 a.m.–12:30 p.m. (in Vietnamese) and Saturday, June 27, 2:30 p.m.–4:30 p.m. (in English)
For more information, call (206) 422-4461.
Jacklyn Tran can be reached at info@nwasianweekly.com.