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How Much Can I Expect to Pay After Receiving a Loan Modification?

How Much Can I Expect to Pay After Receiving a Loan Modification?

Before going through the time and expense of applying for a loan modification, you may be wondering how much money you'll be able to save on your monthly mortgage payments. That's a good question.

Several Ways to Lower Monthly Payments

Because no two mortgage modification applications are alike, it's impossible to predict how much your monthly payment will be reduced if your loan modification is approved. The answer will depend on several factors, including:

  • Your lender and what company backs your loan
  • Whether you are applying for a modification because of a financial hardship, because you were locked into a high interest rate or because your home is under water
  • The amount of your mortgage and value of your home
  • Whether you are current or delinquent on your mortgage payments
  • Your monthly income

For example, the Streamlined Modification Initiative, which runs July 1, 2013, through August 1, 2015, estimates that qualifying homeowners may lower monthly payments by 30 percent, on average. The program is open to homeowners who are between 90 days and 24 months delinquent on loans that are owned or backed by Fannie Mae or Freddie Mac. The loan must be at least 12 months old and the loan-to-value ratio cannot exceed 80 percent.

A report of the government's Making Home Affordable program through February 2013 reports:

"Borrowers with an active 2MP [Second Lien Modification Program] modification, including those with a partial extinguishment of their second lien, save a median $780, or 41% of their combined total first and second lien mortgage payment. Those who received a full extinguishment of their second lien have reduced their total monthly mortgage payment by a median amount of $1,047, or 53%."

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