Whilst a loan modification may seem like the ideal solution for many homeowners who are in financial difficulty, or who are in the early stages of foreclosure, there are a number of important points to consider. A loan modification is not something to be taken lightly; there are no guarantees of success, and the process can be long and complex. The more information the homeowner has may lead to them making a different decision than if they accept the first potential solution that arises.
Here are some things to consider:
- Modifications are not given freely; although all paperwork is in order and the person meets the criteria, it does not guarantee they will get the solution they want. It is thought that of those who apply, only around 10% will actually be approved for a loan modification. (Estimated value)
- It will take a lot of effort on the part of the homeowner: for those considering modification, they will have to be prepared to offer up their finances for scrutiny. There are numerous forms and documentation that need to be submitted, and this can be overwhelming and confusing. This is why it is always recommended to employ an attorney or modification company to help oversee the process.
- It can temporarily remove the threat of foreclosure: When the modification process is commenced, foreclosure proceedings can be halted temporarily, at least until a decision is made regarding the homeowners application. This reprieve can alleviate some of the pressure upon the homeowner and allow them to concentrate on improving their situation.
- Once a modification is granted, it is still only temporary for the first 3 months. The homeowner will have to make the payments in full and on time before the loan is considered permanent.