Loan modification is a process of negotiating the terms and conditions of a particular loan agreement. It allows the lender to change some aspects of the loan (such as interest rates and the term of payment) to make it easier for the borrower to repay his loan. This is considered a beneficial step not only for the latter but also to the former. However, while any person can avail of a loan, not all can qualify for the modification.
Since the modification of a loan agreement involves an evaluation of the borrower, certain criteria must be met before a lender considers it. Before a borrower qualifies for Long Island loan modification, he must meet all of the following:
1. The borrower must have experienced either a loss of income or an increase in expenses.
Before someone qualifies for Long Island loan modification he must prove that he has experienced either a loss of income or an increase in expenses, or both. This is essential because it will show that he really does not have the money to pay for the loan. The documents that can be used to verify this condition are pay slips showing that his income really declined. He can also present documents such as his bills, showing that his family’s living expenses really increased.
2. The borrower receives a continuous flow of income.
Also, it is essential that the borrower must be receiving a continuous flow of income in the form of salaries and benefits, before he can qualify for Long Island loan modification. This is important because the lender has to ensure that the borrower can still manage to pay the loan after such modification. Otherwise, he will be at a disadvantage.
3. The borrower’s surplus income must be at least $300, and it must be at least 15% of his monthly income.
Surplus income is the amount of income left after paying mandatory obligations such as taxes. As such, before someone can qualify for Long Island loan modification with respect to surplus income, two conditions must be fulfilled. First, his surplus income must be at least $300, and it must be at least 15% of his monthly income. This is important to ensure that while paying the loan, the borrower has still enough money for his personal expenses.
4. 85% of the borrower’s surplus income must be insufficient to settle unpaid installments within a period of six months.
This means that 85% of the 15% surplus income previously mentioned must not be enough to pay the loan within six months from the time it becomes due. Otherwise, it will suggest that the borrower can still pay the loan even if his surplus income is at least 15% of his monthly income.
5. The borrower has not yet received a modification for the past two years.
Lastly, it is essential that the borrower has not received a prior modification for a different loan within the past two years. This is important to avoid conflicting claims of lenders because a modification restricts the capacity of the borrower to pay other loans. If he is allowed to take another one while his other loan still exists, his present lender will be at a disadvantage.
The criteria mentioned above are strict requirements that must be followed to avoid putting both the borrower and the lender in a disadvantage. Observing these criteria prevents any borrower who wishes to lessen his burden in paying his loan to resort to Long Island loan modification, even if he really has the money to pay it. Observing these criteria also enables the lender to collect payment from either an insolvent or a bankrupt borrower.