authorize a limited number of modifications
- but only when they are in the best interests
of the loan owner. How could a modifica-
tion benefit a loan owner? As one example,
it might be cheaper to modify a loan than fore-
close, given that a typical foreclosure costs
lenders about $40,000.
The job of the ser vicer is to consider
each modification individually - thus the
need for financial information. You must
provide an accurate discussion of your
finances and why, specifically, a modifica-
tion is necessary. Also, the lender will want
to know if your property is for sale or will be
may then con-
sider a number
including a rate
ance, a shor t
sale or foreclo-
you might do
best having an
with the servicer. Second, look into the cred-
it ramifications associated with any loan
modification. This can be negotiable. Third,
consider selling the property after any pre-
payment penalty period ends.
Q: Where can I find assumable mor t-
A: Long ago there used to be three kinds
of mortgages, those which were freely assum-
able, those that could be assumed with per-
mission of the lender and those that could
not be assumed at all.
Today, it is virtually impossible to find a
freely assumable loan. As examples, FHA
loans originated after December 15, 1989
and VA mortgages started after March 1,
1988 are no longer freely assumable.
The reason lenders no longer make freely
assumable loans is because they worry that
a mortgage may be taken over by someone
less qualified than the original borrower -
someone who will default. As to qualified
assumptions where lender consent is
required, that's OK for lenders because they
can qualify the new borrower, modify the
loan terms and extract additional fees and
changes. Lenders also can say "no" if they're
unhappy with the new borrower's finances
and for other reasons such as a decline in the
value of the underlying property.
Given that we have low interest rates at
this writing, it might be best to skip thoughts
of loan assumptions and move directly to
new financing. There's no sense assuming
many of the loans that have been made in the
past few years because their terms are toxic.
Instead, get new financing with a fixed rate
and better terms.
(c) CTW Features
Need real estate advice? Peter G. Miller, author of "The
Common-Sense Mor tgage," would like to hear from you.
Send your questions to firstname.lastname@example.org. Due to the vol-
ume received, not all letters may be answered.
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