Thursday, January 15, 2009

Loan Modification Menu

There are a lot of different ways to modify a mortgage. Here are a few:

Delinquent Payments Repay over a fixed period (e.g., 6 months, 12 months)
  Accrue to principal, payable at balloon
  Forgive the delinquent payments
Late Charges Repay over a fixed period (e.g., 6 months, 12 months)
  Accrue to principal, payable at balloon
  Forgive the late charges
Amortization Waive amortization (i.e., interest only) for a period
  Recast loan over remaining term or amortization period after delinquent payments/and/or late charges are accrued or after an interest only or reduced payment rate period
Interest Rate/Payment Rate Reduce payment rate for a period, continue to accrue at note interest rate
  Reduce interest rate for a period
  Reduce payment and/or interest rate, capture all or a portion of net cash flow on an income property
Principal Forgive a portion of the principal balance
  Bifurcate loan – reduce the principal balance on a first lien, the reduction amount becomes a subordinate lien due on sale or default (subordinate piece may or may not accrue interest or require payments)

These options can be used in various combinations, so there are quite a few possibilities.