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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.

Finally, the day is almost here. I hope everyone is going to get out and vote tomorrow. I’d like to take this opportunity to highlight what each candidate has said about how he will handle the mortgage crisis. The next president will make decisions that greatly impact the mortgage industry, which will in turn affect the economy. Weigh both sides and consider their stances carefully when you enter the voting booth tomorrow.

ILLINOIS DEMOCRATIC SEN. BARACK OBAMA:

Obama called for the Treasury to require financial institutions receiving help from the financial rescue package passed in October to put a 90-day moratorium on foreclosures for homeowners “acting in good faith.”

He has called for a change to the bankruptcy law that would let bankruptcy judges reduce mortgage principals for bankruptcy filers. Proponents say such a change would encourage lenders to modify more loans for troubled borrowers rather than risk the loan being rewritten by a judge. Opponents say the change could cause a rise in interest rates because mortgage investors would price in the risk of new loan terms.

Obama has also called for the creation of a fund to help state and local governments ward off foreclosures. And he wants to boost penalties and law enforcement to fight mortgage fraud.

He supported the government’s takeover of mortgage giants Fannie Mae and Freddie Mac in September as a stop-gap measure. But he has called for reform of the agencies so that ultimately their public functions will be completely disentangled from their private ones.

McCain has also called for reform of mortgage giants Fannie Mae and Freddie Mac — two government-sponsored enterprises that the government effectively took over in September. Ultimately, he’d like to see them fully privatized, but in the near-term he wants stronger oversight of the agencies and has supported the government takeover.