The high unemployment rates and poor economic condition in the USA are affecting many homeowners’ financial capacity to keep up with their mortgage loan payments. As a result, they stand a risk of losing their homes to a foreclosure. But the loan modification plan is an option they can use to bail themselves out of this problem. However, it’s important to understand what is involved here. Let’s separate the facts from fiction regarding various loan modification plans.
This myth was initially true but it changed when the US Government became involved in it. In the past, mortgage companies never used to accept the fact that you are suffering financial hardships and grant a loan modification unless you’ve not been able to pay your loans for some months. But a recent law by the US government in 2009 has allowed homeowners to access a loan modification even if they are up to date with their payments. It’s wrong to think that deliberately missing your payment deadlines will increase your chance of gaining a loan modification. In fact, those who are current with their payments are in better position to access the loan modification than those who aren’t.
2. Modification can lower the loan capital
This situation seldom happens in mortgage loan modifications. Do not expect the first mortgage company to minimize the capital you owe on the loan. If anyone promises you something like that, be very careful because it might just be a scam. No mortgage firm would deliberately want to cut down the capital unless they plan to add it up on the loan term and increase the payoff time.
3. Loan modification can help you prevent foreclosure at the eleventh-hour
Although loan modification help you avert a foreclosure, it is strongly advised not to leave everything until the last minute before applying for a modification. Usually, you’ll be given a notice several weeks before the eventual date of the foreclosure. This is the time to consult your financial advisor and find out what options you have (e.g. forbearance agreement, deed in lieu, short sale, loan modification). The loan modification expert will tell you the most ideal option available for you. If a loan modification is suggested, it will be better to start your application on time. Once your lender has seen some reasonable progress with your loan application, they may postpone, pause, or suspend the notice for a foreclosure. The key is to start on time and get a negotiator working on your application before the expiration of the foreclosure notice.