Loanmod Approval

What interest rate are you qualified for? Well, that depends on whether you are trying to refinance or get a loan modification. I’ve spoken to many borrowers that are pursuing a loan modification because they feel their interest rates are high. They also feel they should be approved for the best rates offered under refinancing guidelines. That’s not how it works. In fact, if you are pursuing a loan modification, you could very well be approved for an interest rate well below the current market rate.

Mortgage rates under refinancing guidelines actually adjusts on a daily basis. The rates could be 5% today, up to 5.5% tomorrow, then back down to 4.75% the day after. How ever much it changes each day, you will not likely see the mortgage interest rates fall much lower than 5%. However, under the MHA loan modification guidelines, you may very well be approved for an interest rate as low as 2%. Although, it’s not fixed, it’s a darn good rate to qualify for, for the next 5 years. Again, this is only for borrower’s who do not fall under refinancing guidelines and currently going through a financial hardship of some sort. The MHA 2% rate is the floor rate and is not affected by the treasury bond nor is it affected by any outside sources except the Obama Administration. The administration could easily choose to make any adjustments to the guidelines, which so far they haven’t made any further changes to the 2% floor rate. Of course in order for you to get a 2% interest rate under Obama’s MHA program, you must qualify for it first. If you are qualified to refinance then it’s not likely that you will qualify for a loan modification. Seems unfair but, you have to be in a hardship and not have little to no equity to qualify for the MHA floor rate.

If you are eligible for a loan modification but not the MHA – Making Home Affordable Program, then your mortgage lender does have the ability to review your case for other loan modification programs. Banks like Bank of America or Wells Fargo offer multiple loan modification programs. Each loan modification program have their own guidelines and are handled by different departments within the company. In Bank of America, your account could be reviewed by BofA’s AG department – Attorney General, Hope Department, or the manual underwriting department among others. Each of these departments offer different loan modification programs that may include reducing the interest rates, lowering the principle balance, extending the terms of the loan, deferring part of the principle balance or any combination of the above. Now, the one thing that I’ve seen Bank of America, Chase, or Central Mortgage will also consider, is that they will drop your interest rate and modify your loan into an Interest Only loan. Here are some examples. This could be very helpful to your financial situation as the mortgage payments could drop another 10 to 20% compared to a Principle + Interest payment.

Mortgage rates are much more volatile for those who are refinancing than for those who are pursuing a loan modification with their bank. Unfortunately, borrowers with high income, some equity, and have remained current on their loan will not likely be extended the opportunity to get an interest rate similar to the floor rate offered by the Obama Plan. But, it may be worth a try to obtain a traditional loan modification from your lender. Who knows, your mortgage lender could very well offer you something similar to the MHA.

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