Loan modification - reduce interest rate

[oceanlovin'ea]

I had a client today whose 1098 showed about $5000 less interest than last year. She called the bank and the lady from India kept telling her that was all that had been paid. She made every payment except one last year.

So I sent her home to get the loan modification papers. They lowered her interest rate to 2% for the next 5 years. The sixth through the 10th year it goes up one percent per year back up to 6%. Her payment went down $400 per month

In addition, if every payment is made on time, she will get an incentive of $83.33 per month. At the end of each year, if all payments are made on time that amount will be deducted from the principal balance.

I told her if she gets any paperwork from the bank regarding this she must bring it to me at once. I am wondering in the future if that incentive will be considered COD.

That is the first loan modification I have seen. Interesting!

Linda, EA

[S T]

Loan Mods

I had one last week, and I asked for the loan modification paperwork, the paperwork showed that the "deficient amount" which did include some interest and a "whole lot of" fees, clearly stated it was added to the balance of the loan.

So this taxpayer had a reduction of $ 10,000+ for mortgage interest on 2010 tax return, but they had to come up with cash to facilitate the loan mod and the balance was added to their mortgage note.

Somehow I think the Banks "won" again So much for the Loan Modification Program. The fees were very high!

Sandy

[oceanlovin'ea]

client did good

This client had been making her payments but couldn't keep it up. She had to miss one payment qualify for the loan modification. She didn't have all that interest and late fees accumulated.
But that is what I was checking for.
She said she had a lawyer look at it and he said it look real good.

Your case is probably more of the norm.

Linda, EA