Loan modification

August 18, 2008

… is a big buzzword today. The government has been wanting lenders to rework the loans of many troubled homeowners so as to avoid additional foreclosures. The problem is that thus far very few loans have actually been modified.

So what gives. Let’s say you feel like the value of your home has declined somewhat and you’d like to modify your loan. Will the lender just happily lop tens of thousands of dollars from your balance and call it a day. Not really.

But if you are facing a hardship, that might be another story and loan modification could be a potential solution. If your interest rate increased because you took out an adjustable rate mortgage and “didn’t know” that an adjustable rate meant that your payment might increase over time, you can join the chorus of the many who seem to fall into that situation. Even if you did know how an adjustable rate mortgage worked, today’s lending problems work to your advantage because you can probably claim ignorance because you still face financial hardship.

If you or your wife got divorced, lost your job or had unexpected expenses from an illness, you most definitely are facing a financial hardship and should seek a loan modification program with your lender.

Some lenders are more open to the process than others and it might not be easy. Please take note, you’ll have to prove you are facing a financial hardship, not just feeling like you’d like to lower your interest rate or monthly payment.

It will be better than just waiting to be foreclosed but don’t wait until it’s too late.

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