About Loan Modifications. Learn about Loan Modifications a Late Mortgage Solution.
Credit-yogi understands that during financial stress, many things that were once taken for granted are now uncertain. Years ago mortgages were written based on the prevailing lending structure of the time, and more importantly were based on the assumption that the borrower would have a stable and even growing source of income as the terms of the loan were paid. The climate for lending has changed dramatically in recent years. In addition, many borrowers that find that their incomes have been unexpectedly reduced or shut off completely need an effective solution for late or missed mortgage payments.
This combination of changing economic conditions and loss of income has placed many people in jeopardy of defaulting on mortgages. Credit-yogi would like to consult you on the things that can be tried to handle the situation without losing the house, especially since the lending institutions are also affected by these factors and are generally willing to renegotiate a loan rather than simply have it defaulted on.
This renegotiation is called a home loan modification. Here we will help you learn about loan modification programs by first explaining what they are not.
What a loan modification program is not
- Do not confuse a loan modification program with refinancing. Refinancing is basically reselling your house to yourself. Refinancing will require fees and sales taxes to be paid.
- A loan modification program is not a short sale. The house will not be sold for less than market value in an attempt to minimize losses. The best thing about loan modifications is that they are designed to avoid the need to sell the house at all..
- A loan modification program does not involve any attempts to claim bankruptcy. Entering bankruptcy proceedings could be considered as a last resort, and will likely affect your credit for ten years.
What is a loan modification program?
Home loan modification programs works on the existing mortgage rather than trying to generate a new mortgage. Loan modification can encompass one or more of three techniques to reduce current payments on the mortgage.
- An interest rate reduction. Your mortgage holder may be willing to lower the rate of interest particularly if you were issued an unusually high rate compared to current mortgage rates.
- Principle reduction. Your lender may be willing to realize that the original amount borrowed on the property does not accurately reflect the current value of the home. This is a consideration when you have become upside down in equity, with a lower property value versus what is still owed on the principle.
- Extend the term of the loan. Adding time to the term of the loan can easily result in lower mortgage payments.
A mortgage loan modification program can have other benefits as well, depending on the circumstances of the borrower. For example, if late fees have been assessed these fees might be waived by the lender. Even if these late fees are not waived, they can be rolled into the principal of the loan so that they become part of the long term settlement rather than a sum of cash that must be produced up front.
If the situation has gotten to the point of foreclosure proceedings, initiating a loan modification effort may be enough to delay foreclosure proceedings. In that case, a company providing loan modification services should be retained immediately by the borrower.
Where to seek help
While the borrower may attempt a loan modification program by dealing directly with the bank, it is almost always better to retain the services of a company like credit-yogi.com that specializes in and knows all of the details about loan modifications with specific lenders. The lending services are notorious for stonewalling individuals who try the process without professional help. A true professional also knows all the secrets and good deals that are available. This information is rarely, if ever, provided to individuals. Granted, the loan modification service will charge a fee. However, this fee will more than pay for itself in the savings that are realized in the long term from the mortgage modification. Most loan modification services may even roll their own fee into monthly payment to relieve the short term cash obligations on the borrower.
When the mortgage starts to become too much to handle, think about home mortgage loan modification. The sooner you act, the more effective the process will be.