Research shows that payment reduction is the key ingredient to successful loan modifications. Payment reduction can be achieved through one or more of the following:
- Reduce interest rate
- Extend term
- Forbear or forgive principal
Borrower sensitivity to these payment-reducing factors varies depending on many loan, borrow and property characteristics. Frequently, the best modification is a combination of these factors.
OptiMod provides a decisive recommendation as to the optimal loan modification parameters by applying LPS Applied Analytics’ Credit Model to existing loan characteristics and sampled modification options. The parameters that maximize the Net Present Value of future mortgage cash flows also consistently minimize projected re-default rates.
To do less than the optimal loan modification is to position the borrower for re-default; to do more than the optimal loan modification is to give away value.
Contact LPS Applied Analytics to begin performing optimal loan modifications with OptiMod.
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