Loan Modifications and return on investment.  

As tight as things are in today’s economy, the idea of making investments is the last thing on the minds of many homeowners. For those experiencing financial hardship prior to starting the loan modification process, the idea of making investments of any kind is a complete flight of fancy. Still, if the fees charged for a loan modification are looked upon as an investment instead of a cost, these same homeowners may be making the best financial investment of their lives, at least in terms of percentages. Generally, when a mortgage is modified the new, lower payment will be fixed for a period three to five years. Considering that the fees for a typical mortgage modification average around $3,500 the return on investment can be stunning. Where loans are switched away from negative amortization schedules the returns are even greater.

Here are a few examples of actual loan modifications completed for clients of Feldman Law Center. The examples include interest rate changes, lowered payments, the resulting savings, and the return on investment:

1. Mortgage modification with Bank of America – In this example the borrower was originally paying an interest rate of 6.25% with a monthly payment of $3,182. The loan was then modified to an interest rate of 2.875% resulting in a savings of $972 per month. With the new, lowered payment set for five years the total savings will be $58,320, less the $3,500 initial “investment”.
2. Mortgage modification with Bank of America – The borrower in this study was originally paying an interest rate of 7% with monthly payments of $2,683. After a successful modification negotiated by the team at Feldman Law Center the interest rate was reduced to 3.75% resulting in a savings of $756 per month. The lowered payment term is set for five years which gives the homeowner a total savings of $45,360, less $3,500.
3. Mortgage modification with AHMSI - The borrower in this study was originally paying an interest rate of 10% with monthly payments of $3,150. The loan was then modified to an interest rate of 5% with a term of 5 years. With a monthly savings of $1,302 the homeowner’s total savings over the five year term will be $74,620 net of all expenses.
4. Mortgage modification with AHMSI – In this example the borrower was originally paying an interest rate of 8.25% with monthly payments of $2,834. The loan was then modified to an interest rate of 5% with a term of 5 years resulting in a monthly savings of $1,499. Over the next sixty months the homeowner will save $89,940.

The conditions that drive families toward the loan modification process are anything but pleasant and the stress, emotion, and hardship may be like nothing else a family will ever go through. As shown in these studies, a loan modification can be the first step in a family’s return to financial stability.

 The team at The Feldman Law Center stands ready to answer any questions you might have regarding modifying the mortgage on your home. Please call us at (800) 470-0865.