Loan Modification Program To Avoid Foreclosure

For people who are having problems keeping up with payments or trying to refinance their home for lower mortgage payments to avoid foreclosure, there is help on the way. A loan modification program helps those who are in default of 30 days or more, and those who cannot refinance due to decline in housing values and credit tightening.

The economy has turned borrowers who used to be able to pay their mortgages into potential foreclosure risks because of pay cuts, job losses, or rapid declines in appraised values on their homes.

Many homeowners owe more money on their home than it is actually worth. To make matters worse, a lot of these people can no longer afford their payments are forced to sell their homes below the appraised value just to get out from under the mortgage.

You don’t have to be hassled by trying to understand what a loan modification is, as a trained loan modification specialist can help you by first starting with a free consultation to see what program is best for you.

There is a catch to the loan modification program: simply that there can only be one modification during the life of the loan. So it needs to be handled in the right way. For homeowners more than a month behind, quick action is needed in order to complete the modification process.

What the loan modification program does is to get your mortgage payments (principal and interest), your insurance, and any association fees reduced to where it is no more than 31 percent of your gross monthly income. To do this the lender adjusts first the interest rate you are paying and then the principal amount owed.

So if you have a rate of say 7 percent, then you may get a rate as low as 2% and your loan term may be extended to 40 years instead of the normal 30 years we have become accustomed to. Also the lender may then forgive a part of the principal owed, as long as the new principal amount owed is not lower than the value of the home.

Though lenders are encouraged to work with modification companies to adjust the loans, they are not required to do so. To increase lender participation, the government gives a lender incentive of $1,000 per year for up to 3 years if the borrowers remain in the program. Borrowers can also earn $1,000 per year in principal reduction for up to five years if they keep the payments current.

Even borrowers who are already in foreclosure may qualify for this program and borrowers who are in bankruptcy may actually be court ordered into loan modification.

The loan modification program offers a great opportunity for borrowers who are eligible. You may want to contact professional help to gather the needed financial information and get through the process for the greatest reduction of mortgage payments.

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