Avoiding Foreclosure - Loan Modification
For the housing recovery to move forward at a more rapid pace, we need to dramatically reduce the number of new foreclosures. So this will be the subject of the next few posts.
Loan modification is where a lender agrees to restructure a homeowner’s loan to reduce their payments so they can afford to stay in their home. The borrower has to prove hardship and meet several other conditions. Here is some important information from HUD (note this information changes nearly daily and you should check your lender’s web site too):
http://www.makinghomeaffordable.gov/modification_eligibility.html
http://www.nls.gov/offices/hsg/sfh/nsc/faqlm.cfm
It’s imperative to note that your lenders first goal is to keep you making the current payments. Their second goal is to collect as much current information about your financial status to assist them in their collection process, in case you default.
Until recently, most people we have talked to who called their lender for help, did not get the kind of apathetic treatment they anticipated. I cannot tell you how many times people have told us that when they called their lender they said ” You are current in your mortgage. We can’t help you until you are behind at least two payments.” This is not the progressive, kind assistance our government outlined when they passed the stimulus plan. Frankly it creates more stress and frustration with homeowners just trying to do the right thing, and they wonder “Why are these lenders getting my tax dollars for their support?”. Under these conditions, even the most rational people make some irrational decisions that can have an adverse affect on their lives. However, due to pressure and incentives from the government, as well as some time to absorb the constant stream of changes affecting the banking industry, things seem to improving in this area. Lenders seemed to be wising up to the fact that in many cases loan modification is far less costly to the lender than foreclosure. We are hearing success stories where homeowners have received a lower payment plan.
Be sure to check out our next post about loan modification, “Should you try it yourself, use a non-profit organization, or hire a professional”?
Michael & Shannon Collins
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