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Avoid Foreclosure

The current economy is unfortunately causing a massive amount of foreclosures. Individuals who are threatened with this possibility need to understand there are options for them. The lender may be willing to work with the homeowner in regards to saving their home from foreclosure.

The options available to homeowners

The very first subject that should be discussed is the option of a loan modification. This is when then lender offers the homeowner different choices that will help them pull themselves out of the possibility of foreclosure. You must qualify for a loan modification, which requires proof of some type of hardship that has lessoned your income, by some type of accident at work or pay cuts that may have affected your current lifestyle. You will start by writing the lender a hardship letter explaining the reason for a loan modification. First and perhaps the most popular form of help comes in lowering the homeowner’s interest rate. Lenders are willing to do this for you in order to lower your monthly payment and allow you to catch up on the late payments you have accrued. It is best to do as much research as you can on the loan modification process because even though it may save you from foreclosure, there may be some type of repercussion at the end of the agreement.

With lowering your interest rate, you may be stuck with a balloon payment at the end of your mortgage. This rate can be refinanced and paid out in payments, but it is just one thing you should consider before choosing this specific method. Another popular method that the lender may offer is to lengthen your existing mortgage schedule, this will also lower your mortgage payments and allow you to catch up on your late payments. Decreasing the principle is also a very effective way in avoiding foreclosure because once again, it will help to lower your payments. Fixing adjustable rates is yet another option available to homeowners. If your rates have fluctuated, you have the choice to lower your rate to save money as well.

Also available to homeowners looking to avoid foreclosure through loan modification is the lender offering the opportunity to forgive default payments and fees and sometimes a combination of both. Another less-than-popular choice in avoiding foreclosure is the process of a short-sale, which is basically when the lender chooses to sell the house for a loss rather than take a much larger loss that a foreclosure involves. There is the choice of basically taking a break from paying mortgage payments for three to six years, but you will be required to payback the missed mortgage payments by a rising scale after two years.

The benefits of forensic audits

If an attorney is involved in helping you with the loan modification process, they can perform what is called a forensic audit. This can sometimes prove to be very helpful in that they will review your existing mortgage page by page to find any type of discrepancy. Many times, during the loan process, things are overlooked or not documented in a proper fashion. For example, if there was some type of verbal agreement that the lender did not follow through on, this is a matter that should be discussed. If the lawyer succeeds in discovering any type of inconsistency, your lender may be more than willing to help you out of your foreclosure predicament. The lenders law department is eager to take care of situations like this and these matters tend to resolve rather quickly. Forensic auditing is basically a tool that allows the homeowner to have some type of leverage when negotiating with the lender.

If you do not have the income you had during your original mortgage loan, loan modification may be the answer. Start out by writing the letter of hardship and see where this takes you. Again, companies that take care of these situations everyday can help you with the letter and getting approved. If you are approved, lowering your monthly mortgage rate will help you to get back on track with your payments and avoid the dreaded process of foreclosure.

Loan Modification - The Simple Guide

There’s been a lot of talk lately — and a heck of a lot of misinformation — floating around about something called “Loan Modification.”

It’s not hard to see why.

Thanks to a bunch of, shall we say, “crooks” in the mortgage industry (and I’m being kind), somewhere close to 50% of all homeowners in the U.S. are facing some kind of financial difficulty at the moment.

Normally that would be bad news. But here’s the real irony of this whole situation, and why it actually works in our favor for once.

In normal times, when there are just a handful of foreclosures every day, banks can absorb that. They can just write those off and go on about their merry way making billions.

But when times are bad — or when times are REALLY bad like they are now — not even the banks with their hoarded billions can ride it out.

Let that sink in for a second…

The banks can no longer afford to keep foreclosing on homes at the rate they are now. The simply CAN’T do it.

Imagine that. They need to talk to us. They need to work with us.

There’s that saying I’m sure you’re probably familiar with, which is that the Chinese symbol for crisis is really a combination of two things — the symbol for “danger” and the symbol for “opportunity.”

Make no mistake — we’re in a crisis right now.

And up until maybe four months ago, we were focused squarely on the danger side of that equation.

But now, my friends, it’s time to take advantage of the “opportunity” this crisis is presenting to us.

And that opportunity is, for many, but NOT ALL, loan modification.

I’ve never been one to sit on my hands and keep silent when I see consumers and homeowners being steered in the wrong financial direction, so I decided to put together this simple guide on what loan modification is, how it works, and whether it’s an option that works for you.

These are the top three questions I’ve heard asked about loan modification. Hope this helps:

What is loan modification anyway?

Loan modification is exactly what it sounds like — a way to modify the terms of your loan so that you wind up with payments you can afford.

It is NOT refinancing. This is something completely different. In loan modification, someone works with your bank to cut the interest rate, and sometimes even the principal, down to something that’s manageable.

These cuts are often dramatic — 30%-50% in many cases.

Can I do a loan modification myself without hiring someone to do it for me?

Yep. You can also represent yourself at trial. And you know what they say about the lawyer who represents himself (he has a fool for a client).

I don’t mean to make a joke out of this question, because I know it’s a common one and I know a lot of people are confused about it.

Honestly, yes, of course you can try and represent yourself. But I’ll tell you from what I’ve heard on the grapevine, that even seasoned loan modification attorneys get told “NO” by the banks more often than not.

The difference is, when you’re working with a lawyer who knows what he or she is doing, they don’t stop there. They go back and ask again. And again.

And if the bank still won’t listen, well, then maybe they start hinting at the fact that they know where the bodies are buried in all those bad loans (if you get my drift).

Bottom line — when the banks realize they’re dealing with someone who knows the real story about this mess, and their culpability in it, they tend to sit up a little bit straighter and be more receptive to working out a deal.

Okay, so assuming I want to hire someone to do this for me, what should I look for?

This is a pretty easy answer — a guarantee.

There are a lot of shady loan modification outfits out there right now. An incredible demand coupled with a relative lack of supply basically guarantees you’re going to get a lot of novices joining the industry.

A lot of these companies rely on a “best effort” clause, which means, basically, that they’ll make an effort to get your bank to modify your loan.

As long as they do, they’ve done their job.

That’s TOTAL BS.

I mean think about it. Here’s how a company like this would satisfy their “best effort” deal.

Phony Loan Mod Rep: “Excuse me, Mr. Banker, will you modify Mr. Smith’s mortgage?”

Bank: “No.”

Phony Loan Mod Rep: “Okay, thanks anyway.”

Don’t fall for this nonsense.

If the company you’re looking at doesn’t offer a guarantee, then don’t go with them. Plain and simple.

One Final Thought

Loan modification has been in the news recently, and some reporters who quite honestly don’t know what they’re talking about have said it doesn’t work.

They base this assumption on the fact that some people who have gotten loan modification wound up back in trouble six months later.

What they don’t understand is that these loan modifications were done back when times weren’t so bad, and when the banks weren’t as willing to give as much as they are now.

When loan modification doesn’t work it’s generally because the bank just made a token reduction in the payment. They didn’t give any real relief, so of course it’s not going to do any good for the homeowner.

But now, with the banks desperate, and with experienced loan modification specialists out there, they’re becoming more and more successful every day.

I hope all this helps.

Here is an article on Loan Modifications:

There seems to be very few people that have not been touched by the economic downturn of the United States economy. The unemployment rate has reached its highest point in decades, leaving many families wondering how they will make their next mortgage payment.

There is plenty of news coverage about how to receive help if a person is in foreclosure but what about those that are heading towards default? Does a person have to wait until they start missing payments to get help? The simple answer is no. The answer may be an equity loan modification.

First, what is equity loan modification? This is a renegotiation between the lender and the borrower when there is little or no equity in a home. A person can simply refinance when they have a large portion of their principal paid off but this is not the case for most people whose home values have dropped over the past year or two. It may be possible for a person to renegotiate a lower payment through a better interest rate, a longer loan period or even a reduction in the principal. These factors may help a person that is struggling to make their payment.

A person does not have to wait until they are in default to apply for an equity loan modification. Instead, the lender can be notified at any point that the homeowner is heading toward default. A lender would actually prefer that a person does not wait until they can no longer make the payment. This ensures that the lender will still continue receiving a payment as they renegotiate the loan. It may also make the lender more willing to consider a modification of the loan. A homeowner who is trying to correct a situation before it escalates appears more responsible and less of a risk for defaulting on the renegotiation.

There are many different circumstances that a lender considers legitimate reason for a homeowner to be heading towards default. This may include circumstances such as the loss of a job by the primary income earner or a hospital stay that includes enormous medical bills. A lender may consider these situations to only be extenuating circumstances that will eventually be overcome by the homeowner. Lenders are not just throwing around money at whomever is having a difficult time making their payment. Instead, they are offering equity loan modification to individuals that still appear to be a credible risk.

In an effort to stimulate the housing market, the federal government has allocated $75 billion to promote the equity loan modification process. This is an incentive that benefits both the lender and the borrower. Lenders receive a bonus for every loan modification that they process and the borrower receives monetary help for making timely payments to the lender.

Renegotiating a loan can be a very difficult process for a homeowner to take on by themselves. A person facing default would be wise to enlist the services of a company that already deals with this type of loan modification. These companies are equipped to handle the negotiations with a lender and are capable of negotiating a better deal than the homeowner. It will also help give the homeowner some peace of mind knowing that there is someone fighting on his side.