Entries Tagged 'Loan Modification' ↓

During the loan modification process, you will have to convey to your lender your current “hardship” situation, what caused it and what you have done to solve the problem. By writing a compelling Hardship Letter you are communicating to the lender that you have suffered an “acceptable hardship” and will satisfy the bank that, given the opportunity, your loan will be paid promptly in the future.

The purpose of a Loan Modification Hardship Letter is to give an overview of your family’s current financial situation.   What might be an acceptable hardship? Listed here are the generally accepted hardships:

1. Loss of job or decrease in income 
2. Homeowner, family member, or spouse dying
3. Family member or home owner who becomes ill
4. Divorce or relationship breakup
5. Compulsory work relocation
6. Shock from interest rate reset (adjustable loan)

How can you put together a credible hardship letter to support your application for a loan modification which informs the lender of your financial situation? Try to remember the fact that lenders are swamped with desperate debtors searching for a cost effective way to stay in their home.

* A successful loan modification hardship letter should be short, 1-2 pages max.
* Describe the hardship.
* Explain what you’re doing to solve the problem and get back on track.
* Convince the lender that you are responsible and want to save your home.

Savvy and energetic homeowners can negotiate with their lenders to reduce their interest rate, shrink the principle or modify the term and thus start paying a more manageable monthly payment. It is not necessary to be a financial expert; simply understanding the process may help you lower the amount you repay.

WARNING! The process of drafting a hardship letter is only the first step to getting a loan modification. In addition, you will be asked to show an entire statement of finances and documents showing your income. To succeed and give yourself a chance at success, arm yourself with negotiating tips and insider information before contacting your lender about loan modification.

Scott Hudspeth is a nationally recognized expert specializing in bringing new solutions to homeowners.  Scott has also helped release hundreds of Americans from the “credit prison” that too many people find themselves in.  If you find yourself  “payment pinched” or when you or one of your friends finds yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 800-466-5626 ext 149 or at Scott@AmeriFirst.com

In a market heavy with foreclosure notices and flooded with the daily news of struggling and failing lending banks, borrowers are seeking home loan modifications as a possibility of surviving their high interest loans. Banks are apt to offer loan modification only a as a last resort, mostly due to the fact that many banks see loan modification as a way to temporarily avoid a foreclosure, but ultimately not preventing it.  They feel that loan modification will only delay the inevitable and that the borrower will still default at a later time.

What is this process and how is a loan modified? Basically, loan modification is exactly what it sounds like: both the lender and the borrower come to an agreement whereby the structure of the loan contract is changed. This usually means the lender giving the borrower a reduced interest rate, easier repayment terms and possibly lengthening the loan term to reduce the monthly repayment and help avoid foreclosure. Loan modification can be initiated by a government, for example, the Indy Mac fallout. The government will intervene and will modify some 25,000 troubled home loans to assist the borrowers in avoiding foreclosure.

Why is it that there are all these borrowers looking for loan modification? A high number of borrowers are stuck in costly and unaffordable high interest rate loans. Since the value of their homes have depreciated to below what they currently owe on their homes, the borrowers seek loan modification to try and lower their interest rate and monthly payment to make better sense of the whole situation. In fact, modifying the loan is the borrowers’ final solution to the problem of impending foreclosure. A significant number of borrowers with negative equity are trying to achieve loan modification to decrease the interest rate they pay, so that they can avoid foreclosure.

Is loan modification offered by all the banks? While the majority of banks do not like modifying loans; almost all would ultimately offer this to borrowers who are very close to foreclosure. Due to the negative benefits for the lender, they usually see this as the last hope for a troubled debtor who is close to foreclosure. A lender may refuse to modify a loan even though the borrowers seek to do so, after comparing what they expect to lose in that process compared to losses expected from a foreclosure.

Ultimately, securing a loan modification could help you avoid foreclosure and keep your credit rating healthy. However, convincing your lender to agree to alter the loan can be a difficult and possibly unsuccessful process. In a case where the lender will take a substantial loss on a loan, it may be in the lender’s best interest to modify the loan for the borrower.

Scott  is a nationally recognized expert specializing in bringing new solutions to homeowners.  Scott has also helped release hundreds of Americans from the “credit prison” that too many people find themselves in.  If you find yourself  “payment pinched” or when you or one of your friends finds yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 800-466-5626 ext 159 or at Scott@AmeriFirst.com

For many people trying to avoid foreclosure, the process of renegotiating their loan can be difficult to understand.  If you are considering contacting your lender to try and arrange for a loan modification in order to avoid foreclosure, ensure that you are adequately prepared and able to present your case in the best possible light, by getting as much information upfront as you possibly can. I have compiled a list of the Top 10 Questions about Loan Modifications to enable you to be better informed about the way the loan modification process works and what you should expect from it: 

•1.      What is a loan modification, exactly?

A permanent change to one or more of the terms of a borrower’s home loan which enables the loan to be reinstated and results in a payment schedule the homeowner can afford is known as a loan modification.

•2.      Can the Loan Modification include late charges inserted by the lender?

Depending on the type of loan you have, late charges and other penalties may be waived by the lender at the loan modification, but make sure that you get a complete breakdown of all fees, and make your lender explain it to you. 

•3.      Is the bank able to force you into an interior inspection if the property condition is questionable?

Yes. Although they do not normally order an inspection or an appraisal, in order to verify that the property possesses no physical conditions that could adversely affect the value, the lender could conduct any review it considers necessary. 

•4.      How do I determine whether or not I will qualify for a loan modification?

The primary consideration on the part of your lender is going to be whether you have the ability to make the new modified payment both now and in the future. You will have to show the lender proof of your income, along with a detailed financial statement showing your income and expenses to prove to them that if granted the loan modification, you will be able to afford the new, reduced payment. 

•5.      Do I have to already be behind on my payments to get a loan modification?

The majority of lenders have begun accepting applications for loan modifications from homeowners who are not yet behind on their payments, if these homeowners can demonstrate to the bank that in the near future they will not be able to afford their payments. 

•6.      What constitutes a valid Hardship situation?

Lenders typically consider divorce or separation; the death of a spouse, co-borrower or family member; illness; loss of income; job relocation; or military service to be acceptable reasons to entertain a loan modification, although each situation which caused a homeowner to fall behind on their home loan is different. A very important part of a loan modification application would be a compelling letter. 

•7.      Can I stop a foreclosure by applying for a loan modification?

Of course; that is the point of a loan modification. Figuring out a loan workout solution with your lender can bring your loan current and have the foreclosure process stopped. 

•8.      Is it possible to have missed payments added back into my new loan modification? Yes, past due payments can be added to the new loan principal and amortized over the life of the loan. 

•9.      Do I need to hire someone to help me or can I do a modification of a loan independently?

Since most loan modification companies require a substantial fee upfront, your current financial situation, along with your comfort level in dealing with your lender, will have to be considered when you make this decision. Regardless of the choice you make, your number one priority should be to learn everything you can about the process of loan modification.  You should also know what is involved in getting a loan modification application approved and what your legal rights are.  A highly skilled, knowledgeable professional could help with this. 

•10. What are the procedures to have my loan modified?

Do your homework - learn as much as you can about the loan modification process before contacting your bank’s loss mitigation department or a loan modification company so you can make informed decisions. 

Scott Hudspeth is a nationally recognized expert specializing in bringing new solutions to homeowners.  Scott has also helped release hundreds of Americans from the “credit prison” that too many people find themselves in.  If you find yourself  “payment pinched” or when you or one of your friends finds yourself needing real answers and real solutions to credit issues.