Loan modifications may result in a reduction of your interest rates, an extension of your mortgage repayment term and a possible reduction of your principal balance. However, do you know what happens after your loan modification is approved? If you do not, it is time to talk to your loan modification attorney. Your lawyer can explain the provisions that affect your mortgage repayment terms.
You should know precisely what to expect after you are approved for a loan modification.
You should be aware of a 90-day trial period (known as a temporary loan modification) before your lender will inform you whether you are approved for a permanent loan modification.
Keep in mind that some lenders may extend this trial period beyond the typical three months. If you are denied permanent loan modification, provisions in your contract allow lenders to force you to pay the outstanding amount immediately, or else default on your mortgage.
You must read your temporary loan modification provisions carefully and plan accordingly if you do not want your mortgage to go into default. Better yet, hire a lawyer to deal with these details for you before you sign a loan modification agreement.
You should know that many loan modifications include provisions that allow your bank or mortgage lender to raise interest rates after 5 years have passed. After the trial period becomes permanent, your lender has the option to increase interest rates. If you believe this provision may be problematic for your family, talk to your lawyer about hardships that warrant renegotiating this provision.
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