©Robert Floris  - flickr

©Robert Floris – flickr

A loan modification is quickly becoming the fastest and easiest way to stop foreclosure. A loan modification is when the terms of a loan are permanently changed for the life of the loan. There are many questions home owners have about loan modifications and hopefully this article will help clear some of them up.

How does a loan modification stop foreclosure?

A loan modification is when a lender reinstates a loan with a more favorable interest rate and/or term. This immediately stops foreclosure because all the missed payments and arrears are either eliminated or added back into the loan. With a loan modification, many people are able to stop foreclosure and cut their mortgage payment in half!

How do I qualify for a loan modification?

To qualify for a loan modification, you will need to prove that you have enough income to pay a reduced mortgage payment, but not enough to pay the arrears and continue with the current payment. Home owners will need to provide proof of income and proof of the hardship that caused the delinquency.

My lender turned me down for a loan modification or has not approved mine yet. What should I do now?

In many cases, we see lenders automatically turning down loan modification requests, without taking all information into account. This is a result of both the lenders being overworked and lenders who do not want to provide modifications. Another huge problem today, is when lenders tell homeowners that they are “working” on the application, when actually nothing is happening. Eventually the home sells at a sheriff’s sale, while the homeowners think they are waiting for a modification.

In almost every case, a good modification company can negotiate a better loan modification that you will get on your own, saving $1,000’s per year. In the event you are not able to get a modification on your own, don’t be afraid to hire a company to help. Just make sure you do research and find a respectable company to work with. Even when your lender has turned you down, it’s highly likely that you would get approved when using a professional negotiator.

Does the lender have the right to inspect my home before a loan modification?

Yes. The lender may inspect your home to verify the value of the home. Another purpose of this inspection is for the lender to verify there is nothing wrong with the home that would prevent the home owner from continuing with the modified payments.

What happens to all the late fees on my mortgage with a modification?

With a loan modification, all the late fees should be waived and should not be added to the total of the new loan. If your lender is trying to include late fees in your new mortgage modification, you should question this and have them removed. With certain loans, when these fees are not waived, they may be out of compliance with current laws. When laws are not applicable, these fees must be negotiated.

How long does a modification take?

When attempting a mortgage modification, you need to make sure you allow plenty of time. We recommend a min. of 90 days prior to your sale date. If your lender does not cooperate, or if they have not approved your modification within 30 days, then you need to seek professional help. Professional negotiators can get your modification approved in as little as one week, so if your modification is taking longer than a month, you need to start thinking about other options.

The most important thing to remember when attempting a loan modification is to not let your lender put your case off until later or just before the sale. In most of the cases we see, when the lender does not approve the modification within 30 days, they will likely not do it at all. This is when you need to push your lender harder or decide to hire a professional to do the negotiations for you. Don’t be discouraged if they turn down your modification when you are attempting it yourself. Hiring someone will cost a little up front money, but it will allow you to save the home and save you tens of thousands of dollars in the future.

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