Loan Modifications are the buzz. And they are a very much needed financial product. In a billion dollar foreclosure market, Loan Mods are a better first step to restructuring your financial position.
But before you make that final decision to start one, there are some basics that you should be very clear on.
First, you should understand that each state has it's own laws about Loan modifications. Laws that effect when you can start one, how you should proceed with it, what it can cost, and how long it can take. There are also different laws that effect your credit.
Second, you should know the timing around a loan modification. Up until now, a loan modification cannot be formally started until a loan is in a default status, and not yet in formal foreclosure. That means that payment has not been made, and is past the allotted time according to the contract. Each contract must be understood, because they can be different.
This makes the best time to initiate a loan modification critical to getting the best results. The best time to get started is immediately after it has gone into default (usually 30 days late), but not yet received the Trustee Intent to Sale.
That time frame can vary, depending on the Lender.
Be very clear on one thing...this is not a process that you should attempt on your own. There are so many things you may not know about, and you could end up in a worse situation than you had before you started.
Some things that you want to know, that your lender may not tell you.
A loan modification is not a new loan. Therefore, it does not require the whole qualification process again. Since the lender already has your Social Security number and credit check, it should not require that again. So, a loan modification doesn't make you a new loan, just a remodeling of the original one to make it more suitable to both parties.
If you have an Adjustable rate mortgage, your modification is almost always workable. Very few exceptions. If you have a fixed rate, it takes a little more time and expertise from the Negotiator working with your case and the Lender.
Some of the results you might expect with a Loan Modification are:
1. Interest forgiveness. One of the most common benefits is the forgiveness of past interest and accruing interest since going into default, which can often climb to extraordinary numbers in very little time.
2. Interest Rate Negotiation. Another benefit of a loan modification is the possibility of a smaller interest rate. Also, an Adjustable rate may be converted to a lower fixed rate loan, locking in a lower rate can save thousands off the end of your mortgage.
3. Principle adjustment. In rare cases, some lenders have been willing to adjust the amount of principle owed, making the total monthly payment lower, and the time to pay it off shorter.
This is why you need a professional with an awesome record to help you navigate the legal matters, and emotional distress of restructuring your mortgage.
The time a loan modification can take varies from 3 weeks to 4 months. The lender plays a big role in the speed of the process, and the relationship that can be established with the Attorney and Negotiator working your case.
This is a time in your life where you feel the urgency to act quickly, and yet, the fearfulness of acting at all can paralyze one into inaction. The time to begin your research is now.
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