Do I Qualify for Principal Reduction Loan Modification?
Principal reduction loan modification, also referred to as principal forgiveness, is a form of loan modification in which your lender permanently removes or “forgives” a certain amount of your remaining loan balance. Principal reduction loan modification is uncommon, and only offered in situations where the property is “underwater,” or the amount you owe on the loan is greater than the current market value of the property.
This type of modification is the exception, rather than the rule. While most lenders do not offer this type of modification, there are some notable ones that do. Ocwen is currently one of the best servicers for offering principal reduction (forgiveness) loan modifications. Other companies that offer them include:
Currently, principal reduction loan modification programs are NOT OFFERED by Fannie Mae, Freddie Mac, or government agencies such as the Federal Housing Administration (FHA).
If you want to find out if your loan may be eligible for a principle reduction (forgiveness) loan modification, we can help.
What is Principal Deferral, or Principal Forbearance of Partial Claim?
Principal deferral, also known as principal forbearance or a “Partial Claim” (for FHA loans) is more common than principal reduction. A principal deferral or principal forbearance takes place when you agree that if you sell or refinance the property, you owe the total balance, including all arrears and expenses, but the lender bases your monthly payment on less than all of the amount due. FHA has a “Partial Claim” modification, in which they can “defer” up to 30% of the total amount due. (For example, if you owe $100,000, they can “defer” 30% or $30,000 and your monthly payment would only be based upon $70,000)
If you want to find out if your loan may be eligible for a modification where your monthly payment is based upon less than the total amount owed, we can help.
Contact Us to Discuss Principal Reduction Loan Modification
Ira J. Metrick can help you access your loan information and figure out which loan modification options are available to you, such as principal reduction and principal deferral. Contact us today to get started.
