The current state of the US economy with its high unemployment rate and troubled housing market has led many homeowners to seek some form of loan modification from their lender. Homeowners seek loan modification for various reasons such as unemployment or other unforeseen hardships. Higher payments due to the maturation of an adjustable rate mortgage have also led homeowners to seek a loan modification program. There are many misconceptions regarding these types of programs.
Some believe that they must be behind on their mortgage payments in order to qualify for a loan modification program. This is not true. It is true that those who are behind on their mortgage payments are often moved to the top of the queue, but delinquency is not necessary to qualify for a loan. In fact, falling behind on payments can lead to a lower credit rating. If a homeowner falls behind over 90 days on their payments, the black mark can stay on their credit for up to seven years, just like a foreclosure.
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There are cases of people being told they must be delinquent on their payments to obtain a loan modification only for their homes to be foreclosed on as soon as they fell behind. While not necessary, homeowners often choose to retain the services of a loan modification attorney. An attorney can ensure that proper keeping of records and assist with drafting the necessary hardship letter.
Those seeking to modify their loans are surprised at the amount of paperwork that must be submitted. They are even more surprised the third time they are asked to submit the same information. It is crucial that those seeking a modification request a letter detailing what the lender requires. A loan modification attorney can be of assistance in making sure that the lender is supplied with all the required documentation. It is a good idea to send all documents via registered mail.
There are many reputable services available to homeowners in distress, but there is an equal amount or more services that are disreputable. Services that guarantee approval should be avoided. These services can help ensure that paperwork is properly filed and payments are made in a timely fashion, but they cannot guarantee approval. Only the bank can do that, and there approval is based entirely on the numbers. Either a homeowner qualifies or they do not.
The services should never cost more than a few hundred dollars up front. There may be additional fees, but those should only be paid after the modification is approved. Under no circumstance should a mortgage payment be sent directly to a credit repair agency. If an escrow account needs to be established, the homeowner should establish it.
Loan modification is not the only option for homeowners with distressed mortgages. In fact, some homeowners fall behind on their payments even after having their loans modified. Sometimes the burden of debt is just too much to overcome, and homeowners find themselves behind on their payment again. A better option might be a short sale. This is when the lender allows a home to be sold for less than the amount owed. There are always options. A homeowner should make sure they have explored all of their option before making a decision.
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