Experts Opinions Needed

[emmajacob36]

What is the difference between Mortgage Modification and Refinance?

[disneysteve]

They are two completely different things.

Refinancing is for people who want to take advantage of a lower rate and reduce their monthly payment or shorten their loan term (go from 30 years to 15 years, for example). It is for folks with good credit who qualify for the new loan and the best rates. And it is for people who are in good shape financially.

Modification, if it even really exists, is when you try and get the lender to renegotiate the terms of the loan because you can't afford it anymore but don't want to sell the house. The lender could agree to lower the rate or lengthen the term to reduce the monthly payment or even forgive part of the outstanding balance. In reality, probably less than 1% of modification applications actually go through so essentially, this option doesn't really exist.

You've posted multiple threads on this topic. Is there a specific question or situation that we can help advise you on?

[snafu]

I listened very carefully to two separate interviews with Shaun Donovan, Housing Secretary who clearly stated the government's newly modified mortgage program has NO Fees for mortgage holders to reduce their interest rate as well as those who are underwater or have a l-o-n-g list of problems. The government [means taxpayers] will guarantee liability so the banks don't need to be concerned about risk.

Apparently Donovan feels it isn't fair that some mortgage holders pay higher interest rates than current, low rates. Meanwhile, it seems no one has told the banks/mortgage lenders. I know two people in particular who have been trying to get mortgage modification but have been lost in the paper jungle for months. Their banks has had them re-submit the same paperwork more than five times.

What struck me was the No Fee emphasis by the Housing Secretary since the American system has so many expensive closing costs.

[disneysteve]

it seems no one has told the banks/mortgage lenders. I know two people in particular who have been trying to get mortgage modification but have been lost in the paper jungle for months. Their banks has had them re-submit the same paperwork more than five times.

Dave Ramsey gets calls about loan modification frequently and has addressed the issue a lot. Basically, as I said, loan modifications don't really exist no matter what the government keeps saying. They have literally approved less than 5 out of every 100 applications and the actual number is probably close to 0.

[Nightfly]

From my own experience: if you have to do a loan modification, you might be better off considering a short sale and dumping the house altogether. Any loan "modification" (if it can be done) will be designed solely to help the bank, not you. A refinance is essentially paying off your current loan with the proceeds from a brand new mortgage loan with better terms - usually a lower interest rate.

[disneysteve]

From my own experience: if you have to do a loan modification, you might be better off considering a short sale and dumping the house altogether.

True. If you can't afford the house, you can't afford the house. Rejiggering the terms of the loan doesn't really make the house more affordable. It just delays the inevitable.

[greenskeeper]

True. If you can't afford the house, you can't afford the house. Rejiggering the terms of the loan doesn't really make the house more affordable. It just delays the inevitable.

unless they expand the payment length, say out to 40 years

[disneysteve]

True. If you can't afford the house, you can't afford the house. Rejiggering the terms of the loan doesn't really make the house more affordable. It just delays the inevitable.

unless they expand the payment length, say out to 40 years

If you need a 40-year loan, you can't afford the house so I stand by my point.

That's like saying I could afford to buy a Ferrari as long as I can get a car loan with a 30-year term.

[greenskeeper]

If you need a 40-year loan, you can't afford the house so I stand by my point.

That's like saying I could afford to buy a Ferrari as long as I can get a car loan with a 30-year term.

if adding 10 years reduces the payment to make it manageable....then they can "afford" it (using the term afford loosely)

actually my general manager at a club I worked at used a heloc to buy a new Porsche every 3 years or so. His house was long paid for though.