Save Your Home with a Loan Modification

July 13, 2009 by Julio
Filed under Loan Modificiation

If you are in trouble with your mortgage, it is possible to save your home with a loan modification. There are many reasons for people being unable to meet their monthly payments, and it is nothing to be ashamed about, particularly in this current financial crisis.

OK, we might be on the verge of coming out of it, but its effects are going to be felt by many for a long time to come. People are still losing their jobs, or working for less pay, but they still have their mortgages to pay, and these are not going down any. No matter what the reason is for it, a lot of people are finding it impossible to maintain their current monthly repayment rates, and record numbers of foreclosures are taking place.

Is there anything you can do about all this? Of course there is! The lenders have reached a stage where they don’t want to foreclose on you, because with falling house prices, they are not always getting the full outstanding mortgage back, and it costs them a lot of money to take such action and follow it through. They are more amenable to discussing the problem with you than they have ever been.

So what are the possibilities? You could go bankrupt, and if you have a negative equity, where you owe more than your home is worth, and other debts such as credit card debts, filing for bankruptcy under Chapter 7 of the Bankruptcy Code will not necessarily mean you losing your home, as it would do if you had any equity on it, and you will also have your other debts scrubbed. If there is no equity on your home, and you manage to manage to maintain your payments, then you will keep your home, but if you fail to do so, the lender will like apply for foreclosure.

Also, you have to consider if you really want to keep your home when you will have no chance of ever paying it off, owning more than it selling price. Nevertheless, many want to try because they have a sentimental attachment to their home, and there are also many who don’t have negative equity, but would rather pay than sell and clear the debt.

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There are two ways to go about this: either file for bankruptcy under Chapter 13 of the Bankruptcy Code, or seek a loan modification. Let’s compare both of these:

1. File Under Chapter 13

If you have equity on your home, you can file for bankruptcy under Chapter 13, and keep your home. The court will require both parties to come to a mortgage rearrangement that makes it easier for you to meet you repayments. However, if you miss even one, you could lose your home. Under Chapter 13, you are still bankrupt, but can keep your home while other debts are squashed.

2. Arrange a Loan Modification

It is possible to approach the mortgage lender yourself to arrange a loan modification. This can the form of reducing your interest rate, a reduction in capital or an extension in the period over you are repaying the mortgage. Each of these will involve you paying less each month.

However, there is a problem with this: most financial institutions do not like discussing loan modifications with individual members of the public, and you will likely meet a great deal of resistance if you try to do it alone. You have to fill in the proper forms, and follow a specific procedure, including an interview with your bank manager. Many people are very nervous in doing this.

You are highly recommended to use the services of an expert in this field, who understands the entire procedure and can assist you in completing the necessary paperwork. They can also negotiate the modification on your behalf, and most have a very high record of success.

Alternatively you can learn how to do it, and be shown what documents are required, and how to format them, and also the forms are needed and how they are filled in. Do it yourself loan modification advice also shows you how to rite and extreme hardship letter, and gives you tips on carrying out negotiations with your mortgage lender.

Much depends on how serious you are about retaining your home, but if you really want to, and believe that paying less each month would help you, then you are well advised not to try for a loan modification without at least getting the right information on the necessary documentation and forms, and knowing the exact procedure that the lenders will expect.

Either learn how to do it yourself or employ a professional, depending on how much money you have available, but at the very last get the necessary information on how to save your home with a loan modification or you will likely fail.

Your complete step-by-step guide to getting a loan mod,
saving your home from foreclosure,
and saving 1000s of dollars.