Loan Modifications Questions: Fees, Inspections, Late Charges And Other Concerns

If you are considering taking on a loan modification the chances are this is your first loan modification and you have many questions you need answered. The problem when you are doing something for the first time is that often you don’t even know what are the smart questions to ask. This series of articles on Blown Mortgage is designed to ask the questions you should be asking yourself and provide the simplest possible answers.

Fees.

Loan Modifications have an option to bring an asset current. Can I use this option to include all fees and corporate advances?

This option is designed to consolidate all expenses and fees related to the mortgage in as much as it is reasonable. This means you can include in your loan modification any legal fees and related foreclosure costs for any work that has already been done and is applicable to the current default event. This is great news for homeowners that have accrued significant amounts of money in loan modification costs and fees as these can be capitalized into the modified principal balance of the loan modification and therefore enjoy the benefits this affords in principal reduction and monthly income / payment cap.

Inspections.

Mortgagees are always concerned that their loan is secured and that the collateral on the loan is sufficient. Can mortgagees (banks and mortgage providers) carry out an interior inspection on your property if they are worried about the condition of the property?

As annoying as having an inspector check out your home is the mortgagee may conduct any review it finds necessary in order to verify the physical conditions of the property and make sure the value of the property is still sufficient to support the modified mortgage payment.

This is especially important if the loan modification actually increases the amount a homeowner borrows from the loan provider as the bank must make sure the security (i.e. the home) is still good to cover the principal (plus costs) of the loan.

Late Charges

If you are looking for a loan modification you are probably struggling to pay your mortgage or are already behind in your monthly payments. Late payments accrue late charges which carry hefty interest payments. Can a mortgagee include late charges in the loan modifications?

Mortgage letter 2008-21 clearly indicates that “accrued late charges should be waived by the mortgagee at the time of the loan modification.” The key word here is “should”. As we all know what should happen does not always occur by itself, it often needs a gentle (or not so gentle) push for it to materialize.

Make sure you ask your bank or mortgage provider for a breakdown of what is included in the modified principal balance. If your late charges are not waived then they could be charged separately from your modified monthly payments.

I hope the answer to these questions were useful. Our next blog in this series will cover escrow advances, partial claims and interest rates.