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what modification the bank in a mortgage interest rate or principal?

  • December 10 2010 - US
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Answers (2)

Profile picture for sunnyview
Principal reductions are rare. They are often promised by companies looking to make money off struggling homeowners, but are not a solution that is generally offered by banks. Loan modifications are easier to get , but they still require qualifying, following the paperwork and proving financial hardship to the bank.

People who need more information or free government counseling about qualifying for a loan modification can visit Making Home Affordable.gov here.
  • December 13 2010
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The standard loan modification for primary homeowners was set up 2 years ago by HAMP. This modification would reduce the mortgage payment to the borrowers income level of 31-33%. Example, if you make 1000 gross income per month your mortgage payment could be no more than 310/month. The problem with this modification is that no principal has been reduced. The banks many times will include the past due amounts into a foreberance or put the owed monies on the back end of the loan. The modifications were only presented and allowed for homeowners who were 60 plus days late on the mortgage. Lenders were actually telling their borrowers to "go late" on their mortgage to qualify. The end fact is that after the 3-12 month trial period all of the excess monies over and above the 31% new payment level are tacked on and makes the past due amounts cause the home to foreclose anyway. The new Princiapl reduction program set up and established by the  Treasuy department Oct 2010 allow and push the current lender to lower the principal to the current appriased value. This then allows the current lender to "short" the amount owed-they recoup their loss thru tarp funds. the borrower can then replace the underwater loan with a new FHA loan at the current value. This is the only way for responsible (makes payments on time) homeowners to gain relief and in turn solve the housing crisis.
  • December 13 2010
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