AHMSI---how to start loan modification?

[capo77]

We have a "pick-a-payment" type loan from American Home Mortgage and have been paying on it for the past 2 years, 2 months at the minimum payment. The difference between the minimum payment and interest only payment are $1,200 more and we can not afford that and definitely can not afford the fully amoritized payment. We have always paid this loan on time at it's minimum rate and just found out this week that our payments will change due to recap once the loan amount reaches 120% of the original loan. According to the calculations of my original broker, he said we have about 30 months until the rate gets adjusted due to the recap at 120%. I have some questions for those of you who have experience dealing with this situation....

1.) Does a loan modification hurt your credit rating?
2.) Do you have to be late paying your loan?
3.) Re: financial hardship....we do not have a financial hardship paying the minimum payment, but if we were all of a sudden required to pay $1200 more than the minimum, we would NOT be able to....Question: Do we have to wait until they adjust it?
4.) How do I begin the loan modification process?

Thank you in advance for your help,

Tina

[Moe Bedard]

Hello and welcome Tina!

1.) Does a loan modification hurt your credit rating?

As lenders clamp down, credit scores take a hit | LoanWorkout.org

Will a loan modification lower my credit score & Wells Fargo questions?

Starting in September, there's a new guideline for how lenders can report a loan modification to credit bureaus. They can classify it as a "partial payment" of your mortgage. And that can be a big negative mark on your credit report.

Depending upon what else is in your credit history, this partial payment status "can lower somebody's FICO score by over 50 points," said Craig Watts, spokesman for FICO, formerly known as Fair Isaac Corp. and the developer of the most widely used credit score.

The "partial payment" status can stay on your credit report for seven years, says John Ulzheimer, president of educational services at Credit.com. "You have to make a decision, because modifying your loan is going to hit your credit," he said. FICO scores are the most widely used credit scores. Lenders do use a variety of other credit scores and each one may react differently to a loan modification.

2.) Do you have to be late paying your loan?

95-98% of the loan modification I have seen were for borrowers who were late. For borrowers who were on time and tried to get a loan mod, maybe 5% at most.

3.) Re: financial hardship....we do not have a financial hardship paying the minimum payment, but if we were all of a sudden required to pay $1200 more than the minimum, we would NOT be able to....Question: Do we have to wait until they adjust it?

No, but it will be one of the hardest fights of your life to get help before then. Not impossible, but darn close.

4.) How do I begin the loan modification process?

Please download my e-book in my signature and that will help you a lot!!