office-1209640_1920If you’re a lender, you might come across several clients asking how they can restructure their loan, which is also known as a loan modification. The reason for a loan modification is to make the loan more affordable for the borrower, especially in the cases of a potential foreclosure. Many people get restructuring a loan and refinancing a loan confused, and it’s important to know there’s a difference between the two. If you refinance a loan, it’s constructing a whole new loan for the client, but if you restructure, you’re modifying the current loan to make the payments more affordable for the client.

Here are some essential steps for restructuring a loan for a client as a lender from Orlando title insurance company, Real Estate Closing Solutions:

  • Restructuring a loan involves the following:
    • Changing the type of loan
    • Making the term longer
    • Reducing the interest rate, either temporarily or permanently
    • Putting the past due amounts within the principal balance
  • After you figure out how best to restructure the loan with your client, you must then figure out:
    • How qualified your client is
    • If the cost of the restructuring will exceed the cost of the foreclosure
  • To ensure that your client is qualified, they must meet one or more of the following circumstances:
    • They cannot refinance
    • They are suffering a long-term hardship, such as illness
    • They are several months behind on their payments
  • After figuring out if your client is qualified, they must provide the following information to make the restructuring of the loan possible:
    • The most recent tax returns, both state and federal
    • A year’s worth of bank account statements
    • A year’s worth of pay stubs (if applicable)
    • All of the paperwork on their current loan

Whether your client wants to refinance or restructure their loan, you can come to Real Estate Closing Solutions for our Orlando title insurance and lender services. Our Lender Division can help to streamline your process with additional tools and resources. Learn more today by calling 407-615-8550.