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What should I do if I owe more than the worth of my house?

4Many homeowners borrow a heavy amount of loan in order to buy their homes. However, they might face difficulty when the prices of their houses fall. This will result in leaving the homeowner, who bought the house when the market was good, with mortgage debt more than the value of their home. When you owe more than the worth of your house, you can do the following things to save your home.

Contact Your Lender

The first thing you should do is to contact your lender and tell him about your situation. You should ask the lender for allowing a loan modification. If the lender accepts your request, he can reduces either your interest rates or your payments. Most of the lenders allow the borrowers to choose the loan modification option. Don’t panic in this situation and never stop making your payments. You can also hire a loan modification attorney in case you want some legal help.


Those homeowners who are unable to make payments can request the lenders for a deed-in-lieu. In the deed-in-lieu process, a homeowner gives the ownership of the house to the lender. The borrower is then released by the lender from the loan contract and any further liabilities. Deed-in-lieu causes less damage to your overall credit score than the foreclosure.

Short Sale

A homeowner can also go for a short sale in order to get out of this situation. In this process, the borrower is allowed by the lender to sell the property or house for a less amount than what the borrower owes on it.

Stay Put

There is a misconception among many homeowners that the price values of their houses will never go up. This misconception can cost them a lot, as the real estate market is cyclic. If the property values are not high right now, they will definitely go up in future. Also staying put costs you less than short selling and foreclosure.


Bankruptcy can halt the process of a foreclosure sale. In the meantime, your loan modification application can be considered by the lender. However, bankruptcy doesn’t solve the problem of the difference between the worth of the house and the debt.It will still provide you the required time in which you can have your loan modification application considered. If the lender accepts your modification application, you will repay on new terms according to your financial status.

Countrywide Loan Modification – Getting a Principal Reduction

5.Housing Industry heaved a sigh of relief after the official declaration of federal Housing Finance Agency with an announcement that principal reduction is coming. The scheme is going to be a stress reliever for those whose loans are approved and guaranteed by Fannie Mae or Freddie Mac.

Number of persons affected from principal reduction

As stated by FHFA it is expected that around 33000 loan borrowers will be eligible to qualify for the principal reduction program. The stated scheme is having very stringent rules regarding the eligibility criteria. The owner occupant needs not to suffer from strategic default to claim for the benefits of the program even if he has offended the loan repayment regulations for the period of 90 days or more. Cut off date in this regard is March 1, 2016. Other additional requirements to be eligible are the outstanding unpaid principal balance. Borrower can only apply if the outstanding amount is $250,000 or less and whose mark to market loan-to-value ratios and more than one 115%. The plan aims at maximizing support and assistance for the homeless to decrease the possibility of foreclosure by providing win-win situation for the borrower and government-sponsored Enterprises equally. The modification sound all principal reduction capitalization outstanding arrearages, reducing interest rate comparable with existing market rate, stretching  the tenure of loan to 40 years and setting a tolerable amount of principal that can be forgone and forgiven in Future.

Loan modification services

You might need following loan modification services in addition to principal reduction assistance like mortgage modification, foreclosure forbearance, short sale, Mortgage Assistance and counselling. Seeking the services of expert of the loan modification is the most urgent requirement of time. By browsing countless service providers you can easily make the right choice for you .however do keep in mind that such service providers are not associated with state or approved by the lender or government even getting support from the service provider may result in the disagreement from your lender about terms related to loan. Failure to pay mortgage instalments may not only affect your credit worthiness but also result in loss of your property.

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Principal reduction may save you from foreclosure

New Streamlined Loan Modification Program Q and A

4.The Federal Housing Finance Agency has come up with a simple and streamlined loan modification program which has helped the resident owners immensely. Basically the program has aimed to make the entire loan modification program easier and thus reduce the number of foreclosures.

There have been quite a lot of rumors surrounding this program, but following are certain questions and their answers which can help clear the air of doubt around this act.

What is a loan modification program exactly?

To go by the dictionary definition of loan modification, it means to revise, change or adjust your loan. It basically has the following terms in its purview.

The first is the conversion of a floating or adjustable mortgage rate to a fixed mortgage rate. It can also include change in the rate of interest. It can also include changing the amortization term or change in the loan maturity date. Such and many more terms are included in the loan modification program.

Now what is a streamlined loan modification program?

This includes the re-modification or re-structuring which entails less of the paper work involved previously. This makes the process a lot simpler, leaner and clearer to understand and follow. It helps the homeowners avail the benchmark ratio and accordingly set their mortgage rate. This ratio is calculated based on their monthly gross income.

The reason behind creation of this program.

Foreclosures mean a loss of money to the banks. Hence, the government has always aimed at keeping the foreclosures of the minimum. This program has helped the government to eliminate unnecessary foreclosures. They have gone a step ahead and simplified the mortgage modification requirements, which are based on the eligibility to make it simpler on the homeowners.

How is the loan modification program help complete?

Here, the borrower needs to sign the loan modification agreement. He has to return it with the first month’s payment. Once, the first payment has been cleared, this deems the borrower on a 3 month trial period. If during this the borrower stays on his current mortgage consistently, then the program stands to become permanent. This becomes hugely beneficial for the borrower due to its flexibility.

Social media description: Answers you have always wanted to know about the new streamlined loan modification program. Here is a brief preview of some important questions.