Saturday 9 January 2016

Loan Modification Brings Out Harsh Results for Borrowers in Hawaii

Loan modification is a simple adjustment to the loan that makes the payment affordable for most borrowers. The lender as well as the servicer has to go through complicated financial analysis for the loan modification. There is a two part test that all loan modifications must pass so that it get approved by the lender and qualified for government incentives. The process is complicated and convoluted as it takes time.

What are “Front-end, debt-to-income ratio” and its importance in loan modification? 
A loan modification might get doomed to failure before the process even commences. If you want to qualify for a loan modification, the borrower’s current payments for housing debt that includes interests, taxes, insurances, etc. must be unaffordable. When those payments exceed 31% of the borrower’s gross monthly income, then it is termed as “Front-end, debt-to-income ratio”. The loan modification Hawaii service will immediately be rejected if the borrower shows no income or income less than 31% of Front-End DTI. 

How is principle reduction killed by Net Present Value? 
The most effective tool for loan modification is principal reduction that is overcome by Net Present Value. The lender must determine whether the loan modification will cause greater loss or not. The lender must figure out which option so that it provided highest Net Present Value. The Net Present value test includes calculations to determine whether the lender receives more money through a loan modification or selling the property. The test kills many modifications in loan. A loan modification is not a clear job as stated in TV and radio commercials. The harsh results of NPV test should be encountered by a skilled negotiator. The modification is actually of no use for the borrower. You should never pay anyone an upfront fee for loan modification as the failure rate is too high.