Redoing Mortgage loans to a lower interest rate? (3%, negotiating, sales)

[Chickrae]

Ok, I am sure you have been hearing in the news about banks possibly giving owners who are behind in payments and homes about to go into forclosure lower interest rate loans. How exactly would this work? Now that I have an offer on a short sale and the sellers signed and it's to the bank for review, I am worried that possibly the bank might go to them and offer them a lower interest rate. The owners haven't made a payment in six months or so. I guess I am uneducated on who the banks are going to offer these lower loans too. We as home owners would surely like one. We have a fixed rate but if they offer 3% loans, I would be for it. If anyone has more insight on this, would love to hear from you.

[rcarrillo]

Loan modifications are gaining in popularity right now. Since buyers are having a hard time getting financing (or even deciding to buy with employment and economic fears) banks have realized keeping people in their homes is often a better solution than hoping a short sale works.

Also, banks usually are willing to renegotiate interest rates before they negotiate principal reductions... which is what a short sale is. It is similiar to the process of negotiating a short sale. The owner puts together a package explaning the situation and the lender analyizes it.

If they see that the current budget is a problem but that a modification will help the owner get back on track, they offer it. If the situation looks hopeless, they do not... a homeowner can do the process alone or work with a company that helps.

Beware if you are going to use a company. Many of the people doing loan modifications and "saving" homeowners are the same ones that sold them on a mortgage they could not afford in the first place. A lot of people have jumped into the modification bandwagon and are collecting fees and making promises they can not deliver.

Its pretty much the same situation as sub-prime loans a few years ago. Regulations are a work in progress, many companies don't follow the few that exist and others just do not understand them. Always do your research on the person and company you are looking at for financial advice. The BBB, state licensing organizations, google search.

[GregTraub]

I wouldn't be too worried in your situation. Short sales have plenty of other opportunities to fall through, but if the owner is 6 months behind, and already has a short sale in process, I don't see a sudden call coming from their lender saying they are going to lower their interest rate to 3%....and even if they did, depending on the owners situation I doubt they'd take it and would rather short sale. But it's always a possibility.

Be more worried about the seller filing for BK or the bank simply not accepting the short sale and foreclosing.

If you were looking for a loan modification, listen to rcarillo, be wary of companies that do this as a "service" for you, just call up your lender yourself. However if you are in fine financial health and can, your mortgage payments easily (which if your buying another house sounds like you can), didn't buy the house at the peak of the boom, and are not upside down on your mortgage....I don't think you'd be a candidate for modification.