Saturday, November 22, 2008

Loan Modifications for Las Vegas Homeowners?

After the boom of the Las Vegas real estate market 2003 through 2005 and the subsequent decline of 2006 through 2008 and the ensuing Las Vegas foreclosures, many borrowers have been left owing much more on their Las Vegas homes than what they were worth. For those going through divorce, health issues, job relocation or job loss who can no longer afford the payment terms on their loan, there are only three options: foreclosure, short sale or the newest rage: loan modification.

Foreclosure is the most drastic of the three alternatives. Not only is the borrower’s credit ruined for many years, the banks can later come after the borrower for any loss (deficiency) they may take on the home at a foreclosure sale.

A short sale is better, when it can be achieved. While the borrower’s credit is ruined for a number of years, the bank cannot look to the borrower to make up any loss the bank sustains as the bank has already “approved” the short sale amount. However, short sales are very difficult to close, and only an experienced Las Vegas short sale real estate agent can cut through the red tape. And, if the agent can find an investor to buy the home, often the investor is willing to allow the original owner to remain as a tenant.

A loan modification is a legal agreement that takes place between the home owner (or their legal representatives) and the lender that holds the mortgage note (deed) to the property. The modification is an agreement between both parties to resolve the homeowner’s financial situation so that he can afford the mortgage. It is intended to avoid a possible foreclosure and ensure that the homeowner can handle the new monthly payment on a long term basis. Depending on the circumstances, the lender may choose to lower the interest rate on the mortgage, lower the principal balance due on the mortgage, and/or extend the length of time for repayment of the mortgage.

Below are the top 5 frequently asked questions about loan modifications.

How does the loan modification process work? The process is simple, but results can vary greatly depending on how you go about it. Homeowners can try to negotiate on their own behalf with the bank to reduce the payments on their Las Vegas mortgages. But without the technical know how and an understanding of the systems and entities involved, seldom will the homeowners achieve success on their own. Or if they do, the rate and terms negotiated may not be the best possible.

The other way is to talk to a professional modification consultant and to see if you qualify. After you have been pre-approved, you will need to provide the back up documentation to your representatives. Your representatives will present your situation to your lender and handle the negotiating for you. The modification process can take up to 90 days, but the results usually benefit both the homeowner and the lender in knowing that a possible foreclosure will be avoided. Before anyone walks away from their home, they should find out if they qualify for a modification.

How do you qualify for a loan modification? Any homeowner that has experienced a hardship that prevents the homeowner from fulfilling their monthly obligations may qualify. Typically, anyone who has seen a loss of income, anyone who is currently late on their mortgage, anyone who is in foreclosure, anyone who has had medical issues, anyone who has divorced, or anyone who has had any other form of legitimate financial hardship that can be proved may be eligible for a loan modification. Modifications can be used for Las Vegas condos as well as homes.

What are the benefits of a loan modification? The benefits usually involve a lower interest rate for the homeowner, a reduction in the principle owed, and/or possibly the term of the loan can be extended. In some cases all three of these modifications can be negotiated for the homeowner. Each case is unique, and the outcome will be based on the negotiating between the client or their representative, and the lender. But typically anyone who has experienced a hardship should achieve a lower monthly payment.

What are the negatives of a loan modification? The negatives will also vary on a case by case basis. There is usually an up front fee charged by most companies. Be sure that you contact a modification consultant or company that has a high success rate and no up front fees. If a company does not use attorneys with strong relationships to the lenders, their chances of a successful negotiation will be less than those companies that have already established those relationships. Other negatives should be discussed up front by any modification consultant or professional company that you talk with.

So unless you find someone reputable that has successfully done Las Vegas loan modifications (preferably referred to you by a satisfied client) it may make sense to at least try and sell your home on a short sale. The benefit is, if the bank approves the sale they cannot come after you later for a deficiency judgement for any money they may lose. If you would like more information on the shortsale process and how it works, please contact our office at 702-985-7654. With so many homes for sale in Las Vegas, you need to make sure you choose an agent experienced in the short sale process.