A Home Loan Modification is a lifeboat for families who are facing imminent foreclosure and have missed payments. Missed payments can be rolled into the adjusted loan and waiving the late fees. It is a legal process that changes the terms of the homeowner’s mortgage in a positive and permanent way. St. Louis Home Loans’ offers excellent info on this.
When a mortgage payment has not been made for a while, but the borrower can now afford to start making payments again, a lender can attempt to enforce a Homeowner’s Forbearance Agreement. Simply, this creates a second payment due from the homeowner which, in addition to the homeowner making their regular payment, pays past due payments, penalties and fees. Home Loan modifications, though, are a relatively new term for most people, but it is becoming increasingly popular with the current market conditions and mortgage crisis. The reason is because it is arguably the best way for people to avoid foreclosure and save their homes, and sometimes the only way to.
Home Loan Modification is a constant improvement to your existing home loan, it’s NOT a refinance. It does not suffer the high cost of closing related to a refinance. If possible, it will lower your current interest rate, fix adjustable rate loans and pay down a portion of the principal on your home occasionally. Certain terms and conditions are changed so the debtor can pay for the loan. This is a workout solution approved by HUD becoming more common in the course of this foreclosure crisis.
The reasons homeowners don’t have the ability to pay for their current mortgage payments may vary-no job, business issues, income reduction, high back-end debt-to-income ratio, or any other situation that leads to incapacity to find a good source of revenue. The loan in question may be a mortgage or other type of home loan, or even a business loan or personal loan extended by an institution that lends. Many homeowners are not aware of the possibility of using the same workout package prepared for a mortgage Home Loan modification to reduce other consumer loans.
Lenders were open to Home Loan Modification proposals, as the foreclosure process is long and expensive. In actual fact, mortgage lenders want to stop bankruptcy just as much as homeowners do. For them, foreclosure is an expensive and time-consuming process: they have to pay someone to handle the foreclosure process, fix your house and try to sell it. Banks DO NOT want your home-they’re not in the real estate business, but paper. An average foreclosure costs one bank more than $50,000!
Lenders are swamped by demands for Loan Modification. The requests that are correctly packaged, with the correct supporting documentation, go the front of the line and get immediate attention. For this cause it is important that homeowners work and identify for them the best resource for Loan Modification. Too many borrowers find it extremely difficult, at best, to follow the complicated road of Home Loan Modification without their lender assistance.
Banks are gatherers of debts. When a distressed homeowner calls a bank directly to ask about amending their mortgage terms, they ask the bank to write off some of the money that the consumer rightfully owes that bank. Typically the collections department is the first line of contact between a homeowner and their lender. This can add to the distress of homeowners because the collection departments of some lenders are either unaware or unwilling to forward the homeowner to the Loss Mitigation department for a Loan Modification work-out. They’ll be able to bypass this trap with proper homeowner support and move closer to a satisfactory solution. Negotiating with lenders has never been easier than it is today because of incentives provided by the government and the need for lenders to mitigate (reduce) their loss.
According to RealtyTrac, an online foreclosure database, foreclosure filings totaled 1,200,000 in the first four months of this year, up nearly 32 per cent from 2008. And as unemployment jumps, so do the numbers. Furthermore, according to the National Association of Realtors, a home’s median price across the United States dropped 14 per cent in the first three months of 2009 and stands at $169,000. In translation, this means that the housing bottom is not within sight, contrary to many so-called experts. For their dwellings, buyers would continue to lose interest as the risk of more houses joining the foreclosure process and the flooding in REO property further lower sales rates.
Foreclosure conditions continue to be extremely time consuming so it is important that you quickly pursue a good resource for Home Loan Modification. Forfeiture should not be your last resort as there are ways to save your house. Home Loan Modification is one such method, and perhaps the most common today. In some cases, interest rates can be reduced to as low as 1 percent, the lender can provide a temporary moratorium on payments where you don’t have to make payments for a few months, the length of the mortgage can be extended, and/or the principal can be cut.
Actual results will vary depending on individual situations and lenders, your current mortgage terms and your ability to meet the terms of your modified mortgage. If you fail to meet the terms of your modified mortgage, a Home Loan Modification is not a guarantee against foreclosure.
Home Loan Modification is a workout solution approved by HUD which is becoming more common during this foreclosure crisis. Home Loan Modification is a superior option over a short sell, foreclosure deed-in-lieu, or foreclosure. It’s cheaper, easier, and doesn’t inflict your reputation long-term damage than a mortgage or short sale.