A Home Loan Modification is a lifeboat for families that have missed payments and are facing imminent foreclosure. Missed payments can be rolled into the modified loan and late fees waived. It is a legal process that positively and permanently alters the terms of the homeowner's mortgage.
When a mortgage payment has not been made for a while, but the borrower can now afford to start making payments again, a lender may attempt to execute a Forbearance agreement with the homeowner. Simply, this creates a second payment due from the homeowner that pays off the past due payments, penalties, and fees in addition to the homeowner making their regular payment. However, Home Loan Modifications are a relatively new term for most people, but with the current market conditions and mortgage crisis, it is becoming increasingly popular. The reason is because it is arguably the best way and sometimes the only way, for people to avoid foreclosure and save their homes.
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Home Loan Modification is a permanent change to your existing home loan, it is NOT a refinance. It does not incur the high closing costs associated with a refinance. It will lower your current interest rate if possible, fix adjustable rate loans, and occasionally pay down a portion of the principal on your home. Certain terms and conditions are changed so that it would be feasible for the debtor to pay for the loan. This is a HUD approved workout solution becoming more common during this foreclosure crisis.
The reasons homeowners don't have the ability to pay for their current mortgage payments may be varied - no job, business problems, reduction of income, high back-end debt-to-income ratio or any other situation that leads to inability to find a good source of income. The loan in question may be a mortgage or other type of home loan, or even a business loan or personal loan extended by a lending institution. Many homeowners are not aware that the same workout package prepared for a mortgage Home Loan Modification can be utilized for reducing other consumer loans.
Lenders have been receptive to the theories of Home Loan Modification as the process of foreclosure is lengthy and expensive. Mortgage lenders actually want to avoid foreclosure as much as homeowners do. Foreclosure is a costly, time-consuming process for them: they have to pay someone to handle the foreclosure process, fix up your house, and try to sell it. Banks DO NOT want your home - they're not in the business of real estate, but paper. An average foreclosure costs a bank over $50,000!
Lenders are swamped with Loan Modification requests. The requests that are packaged correctly, with the proper supporting documentation, go the front of the line, and get immediate attention. For this reason it is imperative that homeowners research to find the best Loan Modification resource for them. Too many homeowners are finding that navigating the complex path of Home Loan Modification without assistance with their lender can be extremely frustrating at best.
Banks are debt collectors. When a homeowner in distress calls a bank directly to ask about modifying the terms of their mortgage, they are asking the bank to write off some of the money the consumer rightfully owes that bank. Typically, the first line of contact between a homeowner and their lender is the collections department. This can add to homeowner's distress due to the fact that some lender's collection departments are either unaware or unwilling to forward the homeowner to the Loss Mitigation department to work-out a Loan Modification. With proper support to the homeowner they will be able to bypass this trap and move closer to a satisfactory solution. Due to incentives provided by the government and lenders' need to mitigate (reduce) their loss, negotiating with lenders has never been easier than it is today.
Foreclosure filings topped 1,200,000 in the first four months of this year, up almost 32 percent from 2008, according to RealtyTrac, an online foreclosure database. And the numbers are rising as unemployment jumps as well. Additionally, the median price of a home across the United States fell 14 per cent in the first three months of 2009 and stands at $169,000, according to the National Association of Realtors. Translated, this means that contrary to many so-called experts, the housing bottom is not within sight. Homeowners will continue losing value in their homes as the blight of more houses entering the foreclosure process and the flood of REO properties lower sales prices further.
Foreclosure situations tend to be extremely time sensitive so it is imperative that you explore a good Home Loan Modification resource immediately. Foreclosure shouldn't be your last option since there are ways you can save your home. One of those ways, and probably the most popular today, is Home Loan Modification. Interest rates in some cases can be reduced to as low as 1 percent, the lender may 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 may be reduced.
Actual results will vary based on individual situations and lenders, the current terms of your mortgage, and your ability to meet the terms of your modified mortgage. A Home Loan Modification is not a guarantee against foreclosure if you fail to meet the terms of your modified mortgage.
Home Loan Modification is a HUD approved workout solution becoming more common during this foreclosure crisis. Home Loan Modification is a superior option over a short sale, a Deed-in-lieu of foreclosure, or a foreclosure. It's quicker, simpler, and does not cause the long term damage to your credit than a foreclosure or a short sale.
Home Loan Modification is probably the best way to save your home if you are upside down and if you have not been paying your mortgage payment. The worst thing you can do is approach a bank for a Home Loan Modification yourself without some type of support. Home Loan Modification is not necessarily the only solution for those behind in mortgage payments. Home Loan Modification is in some cases the only option to stay in your home before either Short Selling your home, executing a Deed-in-Lieu of Foreclosure, or going into Foreclosure.
Foreclosure may be unnecessary for you and you're family. By taking the first steps to avoid and stop foreclosure, you'll be able to learn and understand just what a Home Loan Modification is and how it may help you stay in your home.
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