Rather than selling the home or deeding it back, Alex Garcia and the lender agree to change the note's rate and remaining term permanently so the monthly payment becomes manageable. What workout solution is this?
Correct Answer
C) Loan modification
A loan modification permanently changes a term of the existing note, such as the interest rate, the remaining term, the principal balance or the payment amount, so that the borrower can afford to keep paying and keep the home. The other retention options leave the note exactly as written and change only the timing of what is already owed. Because these facts describe altering the note's terms rather than rescheduling arrears, this is a modification.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
More Financing Questions
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