Tuesday, May 29, 2012

Home Loan Modification For The Rest Of Us

There is a lot of confusion out there as to what home loan or mortgage modification actually is. I get questions every day about what's involved, which program is right for me, what's this Obama program those are usually followed up by should I do it myself or seek professional help (More on that in another article).

Certainly these are confusing times. I speak with many homeowners every day who are wondering what is going on and what to do. The economic downturn we are in has created unparalleled hardship in terms of the homeowner and with the financial sector.

So let's cut to the chase. The banks DO NOT WANT YOUR HOME. What they do want is a performing loan by performing I mean they want a homeowner that pays their mortgage month in and month out. Banks are not in the real estate business they are in the lending business. If they take back a person's home then the bank has their money tied up in a home that isn't earning them any interest or fees.

However, if the homeowner simply cannot make payments then the bank has no choice but to foreclose on the property and take ownership of it to try and recover the principle amount of their loan. These situations are unfortunate and are happening all around us. Enter the loan modification program.
It really doesn't matter if you're talking about mortgage modification, home loan modification, President Obama's Making Home Affordable program or any of the other of the many versions of a loan modification. All these names are referring to same concept that you and your mortgage company have a common interest to keep you in your home.

Again, the mortgage company is in the business of making money off of loans. It's in their best interest to help keep you in your home. For that reason they are willing to change or modify the terms of the original loan so that the loan is more affordable for the homeowner and they have a higher probability of repaying the loan.

Most homeowners who are experiencing a financial hardship want to stay in their home but are experiencing a decrease in income for one reason or another. The homeowners hardship and the banks desire to have a performing loan makes a loan modification a perfect match. In essence you and the bank are partners working together to get through this tough economic situation with a mutually beneficial outcome.

The process of modifying a loan refers to the negotiation process that takes place between you (i f you choose to do it by yourself or another person or entity that you have selected to negotiate on your behalf) and your mortgage company. At the end of this process your mortgage company will present you with new loan terms that may involved any combination of these: a lower interest rate, extended repayment term, or maybe even forgiveness of a portion of the principle balance owed all of which combine to lower your monthly payment to a more affordable level.

Once your loan is modified you begin making your newly agreed upon monthly payment. Your loan is now current with the mortgage company meaning that any late payments are forgiven, waived, or added back into the principle balance of the loan.

There's much more here to talk about but I'm out of space. Be sure to check out our website for more details on this subject.

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