If you own a home, you have probably heard a lot of talk about loan modification during this time of economic recession. You might know a few details of the program, or you may have just heard the word. Do you need loan modification foreclosures explained simply?
Modifiying a Loan is a simple concept: Instead of foreclosing on a home when the homeowner can no longer make mortgage payments, the bank may agree to actually change the terms of the loan to make it realistically affordable. The bank gets to avoid the costly foreclosure process, and the homeowner gets a second chance to stay in their home.
Who Can Get a Loan Modification?
For homeowners who simply can't afford to make their mortgage payments any longer, loan modification may be an option. Mortgage modification programs are available both at the federal level and through your individual mortgage lender. Depending on the program, there are eligibility criteria that must be met to participate in the program. They may address:
- Amount of principle balance left on the loan
- Percentage of monthly mortgage payment to gross monthly income
- Type or insurer of mortgage
- Primary occupant status (generally no rental properties, vacation homes, or house flipping)
What Circumstances Warrant Loan Modification?
Loan modifications aren't for everyone. In addition to the specific criteria above, all participants must usually demonstrate an acceptable financial hardship that makes it impossible to continue paying down the loan at the present rate.
Acceptable hardships include things like death or illness of a household wage earner, divorce, natural disaster, pay cuts, or job loss. Loan modifications are reserved for those who had financial crises happen to them, and thus are unable (through no fault of their own) to make payments as usual.
How Do I Get a Loan to Modify my Finances?
Contact your bank to ask what types of alternative repayment plans they offer. Most offer modification programs as an alternative to foreclosure, but usually use them as a last resort.
If you are approved for loan, you'll be asked to fill out an application, attach the requisite financial paperwork, and write a hardship letter outlining your financial disaster. After a review and verification process that may take between a few weeks to a few months, you'll be notified whether your application was accepted or rejected.
Who Can Help Me Get a Modification on My Mortgage?
Getting a mortgage modification is kind of like filing taxes: it can be done on your own, but usually it pays to hire a professional to help you with it. Professional loan modification companies, as long as they are trustworthy and reputable, can help you seek modification, fill out an application, write a hardship letter, see that your application is processed as quickly as possible, and help you negotiate with the lender when your case is approved.
If the conditions are right, you could take advantage of modification for your mortgage that enables you to get back on your feet, make payments, and keep your house.