If you are a homeowner in danger of losing your residence to foreclosure, listen up: there is hope! An old but rarely used tool the lending industry is using to give defaulting borrowers a last minute reprieve and second chance is gaining in popularity. What used to be only a whispered recommendation in the past is now causing a buzz on the internet. Know as loan modification, borrowers who are in the pre-foreclosure stage with their mortgage may qualify for renegotiation of their mortgage terms with the lender.
This is not a new loan, nor is it a consolidation loan or refinance offer! Instead, the loan that is currently in effect on your property will remain in effect or, if foreclosure has suspended it, reinstated. The only thing that changes are the terms, and this can work to your benefit in more ways than just one!
If you are a homeowner who has fallen victim to a predatory lender who might have saddled you with a mortgage product you can no longer live with, the odds are good that your loan got sold a few times down the line. At this point your current lender has the option of either foreclosing on your home and accepting the bad debt on the bank’s books, or the lender may decide to offer you a chance to rework the terms of the mortgage to be a better fit to your current financial situation.
In the same way, if you have chosen an adjustable rate mortgage product and realize that the loan is not all you had hoped for, then you are most likely currently suffering from the constantly increasing payments. Your lender may be willing to simply switch your loan over to a fixed rate loan and you are then guaranteed that your interest rate will no longer adjust upward. You do need to remember, however, that any outstanding penalties and fees will be rolled into the loan and you are still required to pay them.
Sometimes lenders decide to extend the time period of a loan to artificially force down the monthly payments. As this is a great help for the cash strapped borrower, it is also money in the bank for the lender since the prolonged loan period results in higher interest payments over the life of the loan. Even if the borrower down the line decides to sell the home, the lender will still come out ahead since the modified mortgage must be paid in full before the title to the house is cleared for the transfer of ownership.
Loan modification makes it possible for many a homeowner to stop foreclosure proceedings now; since many lenders have documentation requirements that differ from one another, it is a good idea to inquire prior to applying what the requirements for approval are, how to apply, what the timeframes will be, and how this will affect not only the foreclosure but also your credit profile.
