A Loan Modification is a valuable tool in helping homeowners get back on track with their loans and protect their homes from foreclosure, but often even after a loan modification people end up right back where they were, and sometimes even worse.?? In fact, more than half (55%) of loans modified in the first nine months of 2008 were 30 days or more late within six months.
The problem? Even as lenders have become more willing to modify borrowers' loans in the past year, many aren't offering deals that borrowers can afford over the long term.
How can you make sure that your loan modification actually works for you and helps keep you on track for the duration of your loan.??
We have some tips to make sure that your loan modification doesn't fail and you stay away from foreclosure for the life of your loan.
Don't Let Your Modified Loan Create a Higher Balance Than What You Started With
Some Loan Modifications fail because the modified loan carries a higher??balance than the original loan...
Because many lenders add unpaid interest and fees to the loan balance, homeowners often walk away with more mortgage debt than they originally incurred. A study found that an average of $10,800 was added to mortgages when they underwent a modification. The average such mortgage was $210,000.
Unfortunately, servicers that reduce loan principal are few and far between.
That may change should Congress pass pending legislation that will allow bankruptcy judges to reduce loan principal for homeowners in Chapter 13 bankruptcy protection. Such a move will provide an incentive for loan servicers to start reducing principal themselves.
Don't Let Your Loan Modification Increase Your Monthly Payment
Some lenders are reluctant to lower rates or waive fees so some homeowners are actually negotiating loan modifications with higher monthly payments than they had before.
It should come as little surprise that with few lenders reducing principal - and most tacking on fees to the loan balance??-??nearly half of loan modifications (45%) actually resulted in increasing a borrower's monthly payment, according to White's study.
When negotiating for a loan modification discuss with your lender all the possibilities so that you can be sure your monthly payment at least stays the same, but don't accept a higher monthly payment.
What Happens When You Are Still Upside Down On Your Loan
Even after the loan modification some homeowners are still upside down on their loans.
Borrowers who owe more on their homes than they are worth have little incentive to stay there, even if their payments are lower.
Borrowers seeking a loan modification often fail to ask their lender to lower the principle on their loans.?? This is a big mistake that can make it difficult for homeowners to really catch up.
Don't Accept Un-Affordable Terms
Desperate to keep their homes, many homeowners accept modification offers they can't afford.
Remember to stay calm and counter un acceptable offers.?? This is a negotiation and you need to watch out for your interests.??
Don't let the process intimidate you, but keep your cool and don't accept any offers that will leave you in a worse situation that you started in.
Don't Let The Process Overwhelm You
Even though customer services reps are typically the first people homeowners get on the phone, they aren't authorized to modify a loan.?? Homeowners often get lost in the maze of management and customer service and will give up on the process.
Many homeowners seek help from loan-modification brokers you must choose your representative carefully.?? Remember there are people out there looking to make a quick buck off your misfortune.???? Don't fall victim, go with a reputable loan modification firm that get's results.
The best advice to make sure your loan modification works for you is to seek reputable professional help in securing a fair and workable loan modification.?? Visit MBACommercial for your free loan modification kit, and access to our loan modification experts.
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