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COVID 19 Recovery modification


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So, we fell behind on some of our payments due to COVID and other unforeseen circumstances and decided to do a loan modification with our lender. We just got the decision back and I was surprised to see that our mortgage payment would really only go down by like 100$.  They actually raised our interest rate to 5% from 4.125% which I am very upset about it. I always understood that one of the purposes of a loan modification would be to  lower your interest rate not make it higher. What they also did was a partial claim amount (which I understand is interest free and you pay if you sell the house.  So basically I think that means they split the loan into 2 loans?  I'm not absolutely sure.  So, I am actually thinking of appealing this decision, especially because of the rise in the interest rate. Any suggestions, thoughts, is this typical?  

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  • 3 weeks later...

On 4/19/2022 at 10:39 AM, Gigi1437 said:

So, we fell behind on some of our payments due to COVID and other unforeseen circumstances and decided to do a loan modification with our lender. We just got the decision back and I was surprised to see that our mortgage payment would really only go down by like 100$.  They actually raised our interest rate to 5% from 4.125% which I am very upset about it. I always understood that one of the purposes of a loan modification would be to  lower your interest rate not make it higher. What they also did was a partial claim amount (which I understand is interest free and you pay if you sell the house.  So basically I think that means they split the loan into 2 loans?  I'm not absolutely sure.  So, I am actually thinking of appealing this decision, especially because of the rise in the interest rate. Any suggestions, thoughts, is this typical?  

did you appeal?

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The reality is that interest rates ARE going up.  It would be disingenuous, even in the 'rona climate, for a lender to give a modified rate that was below market averages.  Further, they already gave a break by allowing 'modifications' to occur rather than simply adding the property to the list to foreclose as soon as the moratoriums wree finally dead and stinking. 

 

While it is understood that some lacked the resources to get through a period of 'rona unscathed, at some point in time, priorities HAVE to be evaluated.  For MOST people, that is keeping the roof over their head, credit cards be damned. 

 

Also, do not be surprised if you see higher property taxes in the next appraisal cycle...many jurisdictions are re-evaluating property valuations to cover the expenses of poor fiscal management at the city/county/school levels.  Worse are the school districts that are trying to get new bond measures passed to coat-tail on the helicoptered funds that were mismanaged.  Your current $100 break may not last long...

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I'm on very soft ground with this topic, so I'll appreciate a reality check from anyone who cares to extend it ...

 

If I understand correctly, there are two key options by which one exists forbearance:

 

-- Repayment of amounts not paid during the forbearance period through an agreed monthly plan for which payments are added to your standard mortgage payment .  This has the benefit that the original loan term is maintained and the original interest rate remains intact.  Obviously, it's a prerequisite that your financial situation can accommodate a higher payment.

 

--  A loan modification in which the mortgage term is extended to 30 years, necessitating a rate change reflecting market rates.  The amounts not paid during the forbearance period are set aside as a subordinate lien against the home on which no interest is accrued.  The lien is payable upon mortgage termination (e.g. sale, refi, or final repayment of the mortgage at end of term).

 

A modification that results in a higher rate is unfortunate, but if the burden of a higher payment upon exiting forbearance (first option) isn't a practical option, the ability to defer the past mortgage arrearages with no interest accrual (second option) is simply golden.

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