- Reinstatement – The repayment of the entire outstanding balance including all payments, inspection charges, late charges, returned checks fees, and attorney fees and costs. This is a full loan payoff. Good if you have come into a lump sum of money and can afford to pay off the loan.
- Repayment Plan or Forbearance to Reinstate – This is a temporary plan where you will be allowed to repay the past due amounts on your mortgage over an agreed upon time frame to help you get current on the loan. Your financials will need to support the current payment and the past due divided by the number of payments your mortgage lender will allow (usually spread over 6 to 12 months) with a goal to get you current by the end of that temporary plan. Example your past due balance is $3,000 and your current monthly payment is $1,000. $3,000 divided by 6 = $500 + $1,000 this will be the temporary payment for 6 months and you should be all caught up on the 7th month. This is great if you have had a temporary hardship and your situation has improved -especially if you are behind but would like to keep your awesome interest rate of 2%.
- Forbearance to Modification – Do not confuse this for a modification. This is also a temporary payment plan at a reduced or equal payment to your current payment – you may get a break in the payment amount of $100 or $200 depending on what type of modification they have you slated for. This is usually offered to a borrower who is a candidate for modification it may bring the loan current. If you complete this successfully, meaning you pay on time and give them all the financial documents they request to be able to prove income (W2s, Bank Statements, Pay Stubs / Profit and Loss, Tax Returns, Hardship Letter, 4506T), and you cooperate with whatever else they need (possibly an interior evaluation of your home), and you qualify you will most likely get the modification.
- Loan Modification – If you qualify, this should help you secure a lower interest rate and a possible principal balance reduction both of which, should result in a lower affordable payment. Usually your mortgage lender will have you start with a forbearance or trial payment plan prior to modifying or re-writing your loan to get the loan. The purpose would be to not only get your loan performing again but also to gauge your performance during the forbearance. There are different types of modifications. Don’t be afraid to ask questions! Such as what kind of a modification they have planned for you. Is it an internal modification or a HAMP (Home Affordable Modification Program), will it result in a fixed interest rate for the life of the loan or will it be a step rate (introductory rate for the first couple of years then it goes up to a higher but fixed interest rate). Will there be a possibility of principal balance reduction? What happens to your past due amount will it be waived or added back into the loan?
- FHA Refinance – There are a lot of refinance programs available even to homeowners who have fallen under water such as the 821, 203B or H4H (Hope for Homeowners). Your mortgage lender would be able to determine if you qualify and which you would qualify for. Not all are credit score driven, most of these programs will take a 580 credit score. Some are performance driven-meaning as long as you have completed your forbearance plan, and have maintained on time payments during your modification of at least 3 months, 6 months or 12 months (depending on which program you qualify for), you may qualify for an FHA refinance. You may be able to receive another principal balance reduction due to the fact that this government insured program will only underwrite a loan equal to its appraisal and if home values have dropped again after your modification was completed, you will receive a principal balance reduction.
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