Your loan servicer may be able to modify the terms of your loan in order to lower your monthly mortgage payment to a more affordable level. Current modification guidelines, however, make this a Bandaid at best. Modifications don't address the real issue—principle balance. While your loan servicer may be able to reduce your payment from $1,500/mo. to $800/mo. by lowering the interest rate, that interest rate reduction is only good for five years. After five years, your interest rate will revert to an index that is tied to market rates. The principle loan balance, i.e., the amount you owe, remains unchanged.
Many borrowers in Arizona—especially those who purchased in the last 3-5 years—have properties that are worth 50%-60% less than what they owe on the mortgage. Forecasts are conservatively predicting a minimum of 10 years before those borrowers can break even. What if you have to sell your home before you break even? Can you afford to pay the difference between the sales price and the mortgage amount? If that happened today, most borrowers in this situation would still owe their lenders $100,000, $200,000 or more to get the house sold. We don't like that.
Your best chance of getting a loan modification is with a Fannie Mae or Freddie Mac loan. Give us a call and we can quickly tell you whether your loan is owned by Fannie or Freddie. Our partner lenders and attorneys can provide expert assistance in helping you obtain a loan modification.
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