Federal loan modification has become available through the Obama administration as a way for lenders to help homeowners rescue themselves from bad situations and resume making regular payments on their home. Formerly, the only option for many homeowners who hit hard times was eviction. Now, thanks to modification options made possible by federal backing, buyers can stay in their homes and resume making payments even if they are on the brink of foreclosure.
The main idea behind loan modification is that it helps lenders and buyers. Imagine that you bought a house for $150,000, and five years later the property value has dropped so sharply that it's only worth $110,000 - but you still owe $120,000. Then your hours get cut back at work, or you take a pay cut to avoid losing your job. You miss one payment, then another. What do you do?
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Many homeowners would simply let the bank foreclose at this point - unable to sell the home due to a depressed market and unable to keep up with payments, they'll opt for walking away and facing a ruined credit score rather than keep fighting the tide. This is not necessary! Ask any lawyer - they'll inform you that you have lots of options, and not to give up yet!
Lenders don't want to foreclose on your home anymore than you want them to. They have no use for depreciated real estate. Truth be told, they'll lose more money foreclosing and selling the house at auction than they would working out a reduced payment with you. This gives you leverage - and leverage can be very useful when you are negotiating. The first step in applying this leverage is to get an attorney in your corner.
Loan modification can take several different forms. If you just hit a bump in the road - a few months of being unemployed before you found a new job, or an illness that took a while to recover from - then you might just need an alteration made to your mortgage allowing you to start fresh on your payments and tack the past due amount onto the end of your loan.
On the other hand, if your income has been significantly reduced, you need to figure out what you can afford per month and negotiate with the mortgage holder to get your payments down to that level. This can be accomplished in several different ways - you can:
Reduce the interest rate on the loan
Extend the amortization (life of the loan) by a period of years
Alter the total amount due
The Obama administration encourages lenders to have homes reassessed, and in some cases even to reduce the principle on the loan to more accurately reflect the current worth of the house. Federal backing makes it worth their while with incentive programs that defray some of the losses the bank incurs by working with homeowners.
Federal loan modification can open doors for you to keep your home, so consult an attorney today and find out how you can save your house and your memories!
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