| For those of us in the loan modification business, lower | | | | in which a 38% debt to income ratio (DTI) is used as a |
| interest rates greatly impact our business in a positive | | | | target for affordability. This 38% DTI ratio looks at the |
| way. In this article I am going to explain how lower | | | | borrower's current principal, interest, taxes and |
| rates help our chances of success in the loan | | | | insurance payment and compares that to monthly |
| modification business. | | | | income . With lower rates and lower payments, more |
| So what do lower interest rates mean in the loan | | | | of our customers who are facing hardships will qualify |
| business? When rates drop significantly those of in the | | | | for a loan modification. |
| loan business call this a "refi boom". | | | | Recall that the FDIC took over IndyMac Bank earlier |
| Is there such a thing as a "loan modification boom"? | | | | this year and IndyMac Bank made a lot of loans that |
| Well, I think there is. When lenders agree to modify | | | | are now in default or close to going into default. |
| hurting borrowers into a new loan, often the lender will | | | | IndyMac Federal (the new name the Bank is now |
| offer the borrower a 30 year fixed rate loan at | | | | operating under FDIC control) is contacting its |
| current market rates (regardless of the borrower's | | | | customers and is offering 30 year fixed rate |
| credit scores, etc.). So when current interest rates go | | | | mortgages permanently capped at the current Freddie |
| down, the modified 30 year rate offered will also go | | | | Mac survey rate for conforming mortgages). This |
| down. | | | | Freddie Mac Survey rate moves with the market so |
| So what does this mean? In a refinance boom, more | | | | when interest rates go down so does this Freddie |
| borrowers will qualify based on the lower payments | | | | Mac Survey Rate. |
| being offered at a lower rate. | | | | So when you are marketing your services to potential |
| So similarly in a loan modification boom, lower rates will | | | | loan modification clients, let them know that rates have |
| also allow more borrowers to qualify for a loan | | | | dropped and their chances of a successful loan |
| modification. | | | | modification are going up if they act now. |
| Consider IndyMac Federal's loan modification guidelines | | | | |