Mortgage Loan Modification. Will It Work For Me?

Previously posted on Activerain

Life was never better than the day that you closed escrow and took possession of your cabin in Big Bear.  You have always loved Big Bear and after much effort, you now own the cabin of your dreams.  You think back to when you were deciding on what tpe of mortgage you wanted.  The 30 year fixed rate was ok, but by getting a adjustable rate mortgage, the payment would be so much lower.  Your mortgage broker convinced you that the adjustable rate mortgage was the way to go.  Yes, it is true that in the case of your ARM, you will need to refinance in 3 years to avoid the increase that will kick in, but that was nothing more than a passing thought.  That is until now.  You have had the cabin for almost three years, your mortgage is going to reset in just a few months, and you will not be able to afford the payment when that happens.  Now what?

What do you do?  The last thing you want is to lose your Big Bear get a way.  You tried to refinance the loan but quickly found out that the value of the home has decreased.  The value has decreased so much that at this point, you now owe more on the cabin than it is worth!  You are feeling like you're stuck between two rocks.  You can't afford the new payment.  If you make that payment, then you're going to fall behind on other debts. 

There is another option that is becoming very popular.  The option is  called a Mortgage Loan Modification.   Simply put, you hire an experienced agent to negotiate new terms for your mortgage.  So, instead of hiding from your lender, contact them and ask for assistance. Your mortgage company would rather work with you than commence foreclosure proceedings, which can be quite costly for them.

 5 Steps To Negotiating A Loan Modification

1)      Make sure that you know the state of your finances before contacting your lender. Determine how ere you can cut costs. You would be surprised at how much you can cut out of the budget if you take an honest look at your spending habits.  Ask a nonprofit counseling service to help you put together this financial analysis for free. The counselor will also help to negotiate with your lender. Consumer Credit Counseling is a good place to start.

2)        Contact your lender and have an idea what you need. Tell them what your situation is and what you can offer to help your situation.  Don't hide from the lender.  Call them, be truthful about your situation and ask for help.

3)      Come up with some kind of an answer to the lender's question of how you propose to pay off the loan eventually. You're better off submitting an initial proposal. At least you've opened the door in the negotiation.

4)      If you think that your financial strain won't last long, ask the lender for forbearance, or postponement of payments, for a couple of months until your finances recover.  

5)      If you have an adjustable rate mortgage that reset and you cannot meet the higher monthly payments, request a loan modification from the lender. They will request a complete financial history from you, detailing your income and monthly expenses. Ideally, you should have some cushion in your income to justify a loan modification, if they switched your mortgage to a fixed-rate mortgage. Show them that you can comfortably pay a fixed rate mortgage through extra income from a second job, and you are more likely to get a modification.     

A Few Tips To Consider

Call your lender as soon as you discover you will experience some hardship in making your monthly payments.

Once you have received a loan modification, make your payments on time to improve your credit.

If your credit is shaky, do some rebuilding before you refinance your loan.

If your loan is modified, your interest rate may be a little higher due to your shaky credit.

The loan modification is bound to have some effect on your credit scores.  But once complete and you're back on tract, your scores will continue to improve as you make your payments on time.

Comments

[save your home]

Hi,
I heard on a loan modification you can delete the second mortgage if you have a firts and a second. Is the true?

[Tony Card]

Hello andthank you for your question. My best advice would be for you to ask that question to your lender. Every lender is diffrent with their guidlines for loan modifications.

[Lis of Ace Cash Express]

Very good tips! It is very important to carefully assess first your financial capacity to know if loan modification is right for you. And would like also to add that due to the ever rising demand of professional consultant to mortgage loan modification, a lot of companies emerged and not all of them are legal or ethical. Be careful when hiring one. Remember to never agree to make payments to anyone other that your loan company or your lender. And also, find out if they have any professional malpractice insurance, in case they either make a mistake that costs you your home, or worse, take your money and fail to perform. That is, after you've assessed that you really need one.

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ACE
http://acecashexpress.com/