Most commonly a mortgage modification is a foreclosure prevention option that is used when your lender agrees to modify your existing mortgage by extending your loan term, reducing your interest rate and sometimes also reducing your principal balance. The basic purpose of the mortgage loan modification is your monthly mortgage payment so it is more affordable for you to keep your home. For small business owners, home mortgage front trouble pressurize already insecure business conditions. Those home mortgages that once seemed a good source of money for the business now could result in the need to lay off workers or even close. Those homeowners who are in trouble for making mortgage payments often hear that their best bet is to contact their lender about a loan modification. But they should always be well prepared when they do so.
Arranging a mortgage loan modification allows you to adjust your repayment schedule to meet your current circumstances. When negotiating a mortgage loan modification there are several options that you have including;
- You can negotiate through a government-sponsored program.
- You can negotiate through a service.
- You can negotiate directly with the lender.
But if you decide to go it alone then here are some of the things that you need to do to ensure successfully negotiating a mortgage loan modification;
- Have the name of a prestigious lawyer at hand, in case you need advice along the way.
- Gather all the pertinent information before starting to negotiate. This includes the reason you want to make the modification and a description of the desired modifications.
- Make sure that you are financially capable of meeting and maintaining the terms of the modifications. You will have to prove your financial status by providing pay stubs, records of expenditures, a recent bank statement, and income tax returns for the past two years.
- Ask your lawyer or bank about any laws, requirements or guidelines you should be aware of before beginning negotiations.
- Prepare your terms of negotiations. Be ready to offer the lender a specific interest rate, monthly payment, number of loan payments, collateral, etc.
- Choose an authority and decide with the lender who to use as an authority in case the negotiations hit a difficulty and complication.
You should always keep in mind that negotiating a mortgage loan modification is not so simple. If you are not 100% sure then you cannot do it on your own so it is much better to hire a respectable professional to negotiate on your behalf. Here are some of the important tips to keep in mind when seeking a mortgage loan modification.
- Don’t fall for any mortgage modification fraud.
- To learn how to best make your case for a loan modification, contact one of the HUD-approved foreclosure avoidance counselors in your area. They can also inform you about any federal, state or local programs that may assist you.
- Get an accurate picture of your finances. Your best chance at getting a modification is to demonstrate the ability to repay and a thorough understanding of the costs and income you face going forward.
- If the problem making payments is short-term, ask your lender about forbearance or postponement of payments for a limited period. Be prepared to demonstrate when you’ll be able to start making payments again.
- If the problem is long term, and what you need is modification then you should be prepared to make an offer and demonstrate how you could repay the modified loan. Be sure your lender is up to speed on incentive programs that may be available to help.
- When negotiating a modification you have to make sure make sure to understand how it will deal with any fees or penalties that may have accrued. Know what fees are in play and whether the modification will eliminate, reduce or tack them on for repayment.
- If the lender would not modify and foreclosure emerges then consider asking the creditor to produce the note that is particularly when a creditor other than the original lender seeks foreclosure. Basically, it is an abstracting technique but can sometimes encourage creditors to negotiate.
- Always communicate with you lender and do not ignore agreement from the lender. Answer phone calls and respond to any letters or notices that you receive. It is typically in the lender’s best interest to help the homeowner avoid foreclosure. Discuss your options right away. If the problem is short-term then the lender may agree to a forbearance or temporary payment suspension. If you need a permanent solution, a loan modification may be right for you.
- Stay in the home until the home is officially foreclosed because you have the right to stay. Moving out of the home is often seen as leaving the property. If you want to qualify for a loan modification, the home must be your primary residence.
- To qualify for a loan modification, you must prove that you have beared a temporary financial hardship. Write a hardship letter expressing your struggle. List dates and any effort you made to pay. You must also show that you are now capable of making a mortgage payment. In some cases, a loan modification does not result in a lower payment. Make copies of recent pay stubs showing your income.