« How to Avoid Home Foreclosure | Home | Loss Mitigation - Ways To Stop Home Foreclosure »
Loan Modification - Is It Right for Me?
By Susan Willets | June 11, 2008
Loan Modification
Loan modification or loan restructuring is becoming a growing trend for avoiding foreclosures. This option allows for a permanent change in the loan contract that is agreed to by the lender and the borrower. This change brings your account to date immediately and saves your home and your credit.
For example, if a borrower can make their current payments, but cannot pay past due amounts, those amounts can be worked back into the balance of the loan to be paid in the future. A second scenario is when a borrower cannot make the payments at all. In this case, the loan may be extended for a longer period of time allowing for lower payments.
Currently, most modifications are those in which the payment amounts are reduced to help homeowners meet their monthly payments. While beneficial to the borrower, loan modifications can be more costly for lenders than foreclosure. Thus, the burden of proving that this is the best option falls on the borrower. You will most likely be required to provide the following:
- Proof of property value
- Documentation that you cannot afford the pending payments
- Documentation of what you can afford
When to Modify Your Loan
The earlier the better is key when you are looking to modify your loan. You want your lender to know that you are on top of the problem and eager to fix it. Anytime you make a change to your loan or your house goes into foreclosure it costs the lender - which of course is something they are trying to avoid. However, while a loan modification may be costly for the lender, it may be more appealing than trying to sell your home after foreclosure. As soon as you have reached a point that you are no longer going to be able to pay your mortgage, begin working with your lender and ask about a loan modification to bring your payments to an amount you can pay.
Be Persistent
Persistence is the key. You will need to be ready to take action and continually follow-up until you get results. You are trying to save your home! Do not wait for the lender to make the first move. Be proactive and keep accurate records of who you talked to and what steps you took to complete the project. Some lenders may not be quick to offer a loan modification as it may not always be in their best interest. If you make contact and don’t get a response, try again and find the name of the individual who handles loan modifications at your bank to contact them directly. If calls aren’t returned, keep calling. Be prepared to put forth effort to see that this process happens. Loan modification is a wonderful way to save your home and your credit.
Topics: Avoid Home Foreclosure |