The Debt Management Expert

There has been lots of press on the topic of Loan Modification. You can negotiate with your bank to modify your loan yourself or by using a third party expert. The government has also now gotten involved and set up a special program to help consumers modify their loans but not everyone qualifies for the government’s bailout loan modification program. Read ahead to see if you qualify for a government bailout or loan modification as part of the Obama Plan. If you do this is a great way to manage your debt and get back on your feet.

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This article describes the pros and cons of short sales and loan modifications. It offers some useful tips for deciding which would be the best option for you.

When you agree to enter into a mortgage on a home, you are agreeing to abide by specific terms set out in a loan agreement. You agree to a payment schedule and a payment amount, based on the amount of the mortgage loan and the interest rate offered by the mortgage company. But what are your options when you find that you can no longer abide by the terms of the agreement? For whatever reason, if you find yourself unable to meet your mortgage payments, there are several options available.

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Here is a specific example of a hardship letter you could use for a loan modification if you fall behind in your payments. For a little more detail on putting a hardship letter together see: Tips on How to Write a Hardship Letter for a Loan Modification or Short Sale
A hardship letter is a letter written to your bank or mortgage company telling them why you can no longer afford to make the payments on your home. This letter describes your hardships and specifically what has happened that caused you to fall behind.
Based on the current credit environment, hardship letters are being used as a tool to help homeowners avoid foreclosure on their homes. The result can be a modification of the loan or the acceptance of a real-estate short sale by the bank.

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If you’re having trouble keeping up with your mortgage payments, then perhaps a mortgage loan modification might be the answer. A loan modification can reduce your monthly mortgage payments and help you keep current with your mortgage based upon your financial means. However, when you talk to your bank or mortgage lender about a modification, are your or the bank’s best interest involved?

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Millions of Americans are feeling the stings and arrows of the declining economy. In 2008, over 250,000 homes were foreclosed each month – which translates into three million homes foreclosed in the entire year. More credit card debt is racked up each month, and millions of Americans are looking to consumer credit counseling services for debt management help. Now that newly elected President Obama has signed his stimulus bill into law, what does that mean for the average American with debt management issues?

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What is a Loan Modification?
Loan modification is a process whereby a homeowner’s mortgage is modified and both lender and homeowner are bound by the new terms.
A loan modification is a process where one or more of the characteristics of a loan and/or its terms are adjusted because the homeowner is unable to make payments under the original terms or because the value of the property is worth less than the borrower owes.
Great I know what a Loan Modification is. What are the things to watch out for?

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Before you get started on the process of attempting to get your loan modified you must first understand that you will need a little patience. The typical time line for a loan modification is between 60 and 90 days.

The second thing you must understand is that you need to be very open in terms of your current financial and personal situation. Not disclosing information to your bank or third party negotiator will only lead to disappointment down the road for your loan modification.

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A hardship letter is a letter written to your bank or mortgage company telling them why you can no longer afford to make the payments on your home. This letter describes your hardships and specifically what has happened that caused you to fall behind.

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If you are a homeowner interested in and qualify for a loan modification, it is important to keep in mind that the lender is forgiving a portion of your debt. There are several types of loan modifications that a lender can offer you: interest rate, length of amortization, principal balance reduction for a first mortgage as well as for a second mortgage. Principal balance reduction is the most coveted approach of all loan modifications. Make sure to avoid quick fix loan modifications that may be offered to you such as a simple forbearance, short sale, deed in lieu, or temporary interest rate reduction. These types of loan modifications may seem appealing at first, but they will generally hurt you in the medium- to long-term.

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If you are a homeowner considering a loan modification, keep in mind that a bank is as interested as you are in avoiding foreclosure. If you are a borrower who can continue to make payments, a bank will make every reasonable effort to help you modify your loan. However lenders will not grant loan modifications to every applicant. If you are a borrower and you cannot show the ability to repay the loan on time and consistently for the foreseeable future, then a bank would lose more money in the process and there is little benefit for the lending institution to do a loan modification with you. Foreclosure is a better option for the bank.

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