A loan modification is the changing of one or more terms of a loan due to the inability to the borrower make payments in the agreed upon time frame or because the property is worth less than the homeowner owes. Generally, it means that you have taken out a loan to purchase a home but are not able to make payments in accordance to the agreed schedule determined at the time of applying for the loan.
Timing
Loan modification is an option to avoid foreclosure. However you must contact your lender as early as possible. Any loan modification expert will tell you that the first thing you must do is to contact the lender. Timing is vital. You should contact your lender as soon as possible, preferably when you are current but likely to default in the near future. You can also request your lender for loan modification if you are behind in your payment. But there are limits to how far behind you can be. If you are a month behind, you stand more chances of being accepted by the lender than if you are 6 months behind.
Negotiation
Once you contact your lender, you have to start the negotiations with the lender. Your lender will be acting in its own best interest. Don’t jump into a negotiation cold. Before you meet up with your lender, decide what would count as a victory. What do you exactly want out of the negotiation and at what’s the price you are willing to pay? You must be ready and willing to compromise. You cannot be adamant.
Before negotiating with the lender, you need to do some ground work. Find out the reasons that caused you to fall behind in your payments – lay off, medical expenses, etc. List all your current financial resources and your debts and expenses. You should also have your repayment plans ready. This will have a strong influence how far the lender will go to help you. Share a written short term repayment plan that consists of a simplified life-style as well as additional sources of income where possible. Confirmed financial assistance already in place may also be shared.
Other useful information
Can you afford it? Loan modification can cost anywhere from $2,000 to $5,000.
You lender may overestimate the value of your property. So you should do some research and find out the estimated value of your house before contacting the lender. If you have enough equity in your home to pay off mortgage dues and foreclosure expenses, then your lender is likely to consider foreclosure as a low-cost solution. Loan modification will not make the loan go away. It only modifies the terms of the loan. You still have to make payments. So make sure you can make the payments in future.
Getting Legal Help
If you are considering a loan modification, consult with an experienced foreclosure attorney. An experienced attorney can provide you with valuable tips for a successful mortgage loan modification.
