9 Disadvantages Of Loan Modification
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1. Impact on credit score:
If the borrower, in the process of obtaining a loan modification has missed any mortgage, or other payments, those will still impact their credit report, regardless of the outcome.
2. No guarantee of a permanent modification
3. The borrower may require paying tax if the principal amount is reduced.
4. The real truth is that despite what some loan modification companies may pitch, applying for a loan modification does not stop foreclosure.
5. Processing costs and legal fees:
The borrower may find that there are fees involved with completing the loan modification itself.
6. Don’t assume you’ll save money:
Be aware, too, that a loan modification may not actually lower your monthly mortgage payment or save you money over the long term.
7. Unemployment Income Can’t be Used for Income on a HAMP Modification.
8. Loan Modification is a One Shot Deal:
You only have one shot at applying for a home loan modification.
9. Escrow for Taxes and Insurance Required for HAMP:
If you are approved for a HAMP loan modification, you will be required to escrow for your taxes and insurance.