As the mortgage meltdown continues to affect homeowners nationwide, many families find themselves faced with a possible foreclosure if the bank is unwilling to help adjust the payment.
If you've fallen behind on payments, or can see that as a possibility down the road because of some type of financial hardship, then it's wise to explore all options that are available to help avoid foreclosure.
In this article I will describe 3 choices that all homeowners have if faced with this decision.
Once you've read about these options you should have a clear insight as to what your best chances of success will be based on the road you chose to follow.
1.
Contact your lender, and apply for a bank loan modification.
When you realize that your about to fall behind, or have already, the first thing most people will do is contact their lender directly, and apply for a loan modification through the bank.
This seems like the most logical decision, although it may actually make things worse.
If you are someone who knows that in the future either because of job loss, or a reduction in income you will be unable to make the full mortgage payment, you may elect to contact your lender and ask to renegotiate the mortgage terms.
Even though your being proactive about your situation, and trying to avoid falling behind, many lenders will refuse to work with you until you are delinquent.
Worse yet, your bank tells you that if you intentionally miss a payment that this would make you eligible for a modification, at which time you do so only to be denied and now find yourself behind a few thousand dollars because of penalties and interest.
Or in a different scenario you've fallen behind and tried to contact your lender to apply for a loan workout, at which time the bank agrees to put you in a trial modification that is structured to be temporary, and with the banks best interest in mind.
Once complete you are reverted back to your old payment with the difference of what wasn't paid during that time being added back into your old mortgage payment, sometimes adding thousands to the front of the loan.
This situation happens on a daily basis, and many homeowners are desperate to receive some type of relief and quick to act without fully understanding how the program is designed to function.
In both of these scenarios, the bank has complete control over your negotiation or lack there of, which puts the homeowner at a severe disadvantage when it comes to actually helping someone stay in their home.
The bank has its own interests in mind, not the homeowners.
They are in the business of making money not losing it.
When you understand how the banks operate, deciding to go this route does not make any sense for a long-term solution to the problem.
2.
You contact a non-profit agency to help you get a loan modification.
If you decide to take this route there are a few advantages over going directly through your lender, but also some significant disadvantages to this strategy as well.
What these organizations have been designed to do is educate homeowners on the process, what is required, how the programs are structured, and ways to increase your chances.
Clearly this is much better than going it alone without any knowledge of how the system works, but this is where the advantage ends.
What many homeowners don't realize about the loan modifications, is that it is a legal negotiations that take place between the banks high power real estate attorneys, and yourself.
So once you've educated yourself, and gathered all the necessary documentation to move the process forward like the non-profit has instructed you to do, your left by yourself to negotiate your own modification terms.
The non-profit organizations will not provide any legal advice or representation in the negotiation.
It's obvious that this is the most important part of the process, but you are at a significant disadvantage if you have no legal or real estate negotiating experience.
Although you may have everything the bank requests, and in perfect order, once the negotiations take place the bank will find something to deny your application and your back at square one.
3.
You work with experienced loan modification experts, and a real estate attorney who specializes in loan workouts.
It should be obvious right off the bat that this option gives you the best chance of a long-term favorable agreement because you have a professional negotiating on your behalf with your best interests in mind.
When you decide to work with experts who know how the banks operate, and the indicators they use to approve and deny deals based on previous experience, it levels the playing field and gives you the best chances of successfully adjusting the terms of the loan to reflect your current financial situation.
Another major advantage of this option is the attorneys ability to try two options when it comes to reaching an agreement with the bank.
Currently if you try to modify on your own, the banks will attempt to qualify you for the government sponsored H.
A.
M.
P.
program or home affordable modification program.
If the financial data you supply does not fall within the banks strict guidelines for acceptance, then that's the end of the road and your back at square one, many thousands of dollars behind.
An experienced real estate attorney will try to get you into the H.
A.
M.
P program initially because it provides the most immediate reduction in interest rate and payment.
If this attempt is unsuccessful the attorneys second option is to try for an alternative modification where an agreement is reached to reduce the interest rate and payment to a specific fixed rate for the remainder of the loan.
Anyone who doesn't use an attorney for the negotiations doesn't even realize this is an option the banks are willing to negotiate.