A local lender sent out the email below. Alhough hardly anyone gets a loan mod, Sellers who are considering modifications -vs- short sale really need to know the info below:
In these difficult economic times home owners are often forced to make difficult decisions about how to handle mortgage payment they can no longer afford. One of the options is a loan modification. Everyone knows they are tough to get, but here is the problem almost nobody knows about:
ALMOST EVERY LOAN MODIFICATION INVOLVES DEFERRED DELIQUENT PAYMENTS that are rolled back into the loan in order the bring themortgage history current.
EVERY traditional loan program available today - Conventional,FHA, VA, USDA, etc., considers a loan with deferred payments as an ONGOING DELINQUENCY, regardless of the history on the credit report.
This means NO NEW LOAN CAN BE MADE UNTIL AT LEAST 1 YEAR HAS PASSED AFTERTHE LAST DELINQENCY.
Some loan mods stipulate that the borrower catches up on the deferred payments in the first few years after the mod. In this case they may be able to get a new loan 1 year after the deferred payments are caught up - maybe 4 or 5 years in the future - probably more than the 2-3 year time frame for a foreclosure or short sale.
IN ADDITION, MANY LOAN MODS DON'T STIPULATE A TIME FRAME.THIS MEANS THEY WILL NOT BE ABLE TO GET ANY NEW LOAN (REFINANCE, PURCHASE, WHATEVER) UNTIL 1 YEAR AFTER THE LOAN IS PAID IN FULL.
In other words if someone does a loan mod in year 3 of a 30 year loan they won't get another loan until at least 1 year after they sell or pay off the property. Making normal payments, that would be 28 YEARS IN THE FUTURE.