Loan Guide

What is a loan modification anyway?

A Mortgage loan modification is a permanent change in the terms of your mortgage loan that allows your loan to be place back in good standing with your lender and potentially reduce the interest rate and provide affordable lower monthly payments. Modification is not a refinance of your home but a renegotiation of your current mortgage terms. The modification may include but not limited to a new interest rate, an affordable monthly payment, principle reduction and amortization schedule. A loan modification to stop foreclosure is a viable option that you can use to keep your home.

If you are one of the many Americans having a difficult time and have fallen behind on your mortgage payments. You are not alone. The first thing that you may be tempted to do is purchase a “do it yourself loan modification kit”. Well, if you are tempted and think that will solve your problem please keep reading.

So what are the advantage and disadvantages of a “do it yourself” loan modification?

Advantages

The primary advantage of a “do it yourself” loan modification is the money you will save by not hiring a legal professional to negotiate your loan. A loan modification “do it yourself” kit will give you all the necessary documentation and step by step process to negotiate with your lender.

Disadvantages

There is really no reason to purchase anything because if you need any information on modifying your mortgage loan that information is readily available through US Department of Housing and Urban Development (HUD). They will offer you free counseling and provide you with material to work with your lender and modify your loan.

However presenting your case of “hardship” to your lender may not be as easy as one may think. First of all you will need to know who to talk to. Once you find that person they will ask you to provide documentation to backup your hardship status. This could be a hardship letter, income statement and other documentation that may be requested. After providing the documentation then the lender will review and make a decision on whether to approve or decline the application and at this point you will begin the negotiation process with your lender.

So “do it yourself” could potentially save you some money but it will be a very time consuming process and at times it may be very aggravating and most likely a poor experience overall. A mortgage loan modification process can take a week to 90 days to complete. It will be dependent on your lender.

So be careful before you jump down the “do it yourself” route and only go in that direction if you are ready to dedicate plenty of hours and you like challenges.

What’s my alternative to “do it yourself”?

The alternative to do it yourself is using outside sources. If you decide to go the path of using the outside source make sure you are dealing with a professional company that is backed by legal team. Most outside source will charge you a fee on average of $2,500. Although this may seem to be a steep price your loan modification will be negotiated through professional attorneys who will not only save you money but remove the time consuming task and aggravation that you would have if trying to settle yourself.

The chances of a shorter loan modification process are much higher given that most service providers have established relationships with lenders and know who to talk to, what paperwork is required and how long the process may take. In other words your fee will be well worth your investment and you can be assured that in most case the service provider legal team is looking out for your interest.

So what should I do?

Although we encourage you to work with your lender if you are a payment or two behind, the reality is homeowners are probably not the best position to negotiate with their lender and in most cases you will end up in a more difficult position. Most of your lenders will know much more than you on laws as it relates to mortgage loan modification and could potentially take advantage of your lack of knowledge in this area. So my recommendation is to work with a service provider that has an experienced legal team and has dealt with multiple lenders. Do your homework and find a good service provider that will be looking out for your interest and not the bank or lenders interest.

By: Ronald Moore