Loan Modification Methods and Impacts on Foreclosure

REO foreclosures are intimidating to many home owners as they are on the increase. There are so many companies that have come out of the “wood works,” attempting to offer loan modification methods to help in the foreclosure process.

Some of these loan modification companies charge exorbitant fees and some are shady and cannot help to keep the homeowner out of foreclosure as promised. In a lot of cases, it is reported that the loan modification sometimes will increase the homeowner’s monthly mortgage payments instead of reducing it because of the all fees associated with the process.

This is destined to propel the homeowner back into foreclosure bank repossession again. There are many loan modification companies that make it difficult for the homeowner to even attempt to modify their loans because they charge an upfront fee of up to $1500. However, the homeowner can ask to be put on a payment plan of paying three payments of $500 over a period of three months.

The homeowner can try to contact their mortgage payment directly instead of using a loan modification company. Doing so will help them to avoid the initial fees. The bank will need a financial hardship letter, three months bank statement, pay stub, current tax returns, and if self employed, a profit and loss statement.

The homeowner will incur late fees, unpaid taxes, unpaid insurance, in some cases and other fees associated with the modification process. All these fees will be added to the mortgage balance. The balance may be more than what the property is appraised for.

The purpose of a loan modification is to reduce the monthly mortgage payments of the homeowner so that it can be more affordable to what was originally being paid. Some of the reasons for mortgages to face foreclosure all over again through the modification loan process are due to increased job loss.

Homeowners are trying hard to get qualified for the loan modification program to stop foreclosure and keep their homes, but some are not having the success that they thought they would. Hopefully, President Obama, will make concessions for those who have tried and failed to qualify.

The outcome of the modification process also depends on the bank that the homeowner is working with or the loan modification company. The bank will usually be more lenient if the homeowner shows interest and makes a commitment to stick with the program.

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