The other day I told you about how your can stop foreclosure by working out a deed-in-lieu-of-foreclosure.

Today I’m going to tell you about avoiding foreclosure by getting a loan modification.

The Loan Modification includes changing the original terms of the mortgage through several methods. This option provides for either a permanent change in one or more of the terms of a your loan, which allows a loan to be reinstated and results in a payment you can afford. If your mortgage is an adjustable loan, the lender might freeze the interest rate before it increases or change the interest rate to a more manageable rate for you. A lender might also extend the amortization period. This is called a loan modification. Loan modifications are rare. A loan modification can consist of any of these things:

• A permanent change in the interest rate.
• Capitalization of delinquent principal, interest, or escrow items.
• Possible extension of loan term.

The use of any three of the above items will result in the re-amortization of the loan. Maximum interest rate adjustment to current market rate plus 150 basis points although at mortgagee’s discretion, note interest rates may be reduced below market.

All or a portion of the PITI arrearage (Principal, Interest, and Escrow Items) may be capitalized (added) to the mortgage balance. Foreclosure costs, late fees and other administrative expenses may not be capitalized.

The Mortgagee may collect the legal and administrative fees (resulting from the canceled foreclosure action), from you to the extent not reimbursed by HUD, either through a lump sum payment or through a repayment plan separate from, and subordinate to, the modification agreement. No administrative fees for completing the Loan Modification documents can be passed on to you. The modified principal balance may exceed the principal balance at origination and the modified principal balance may exceed 100% loan-to-value. The following conditions will apply:

• All Loan Modifications must result in a fixed rate loan.
• The Loan Modification must fully reinstate the loan.
• Subsequent defaults are to be treated as a new default

Russell Bradchulis is the CEO and Founder of Foresight Home Solutions, LLC, a full-service real estate solutions provider specializing in Foreclosure Assistance, Residential Redevelopment, and Estate Liquidation. You may call him at 781-333-4447 or email him at russell@foresighthomesolutions.com