Loan Modification Can Save Your House

Hundreds of thousands of Americans have either been foreclosed on, or are facing foreclosures. Neither the banks, nor the homeowners want this to happen. Banks don't want it to happen because they're forced to write down foreclosures, which runs the risk of the bank failing. Homeowners don't want to lose their homes. The root cause of most foreclosures is bad lending practice at the start of the lending process, it used to be that home buyers had to show 30% of the list value of the home as a down payment, and a year's worth of pay stubs to get a mortgage. Equal opportunity in lending laws meant that this was deemed discriminatory. When this was combined with an incentive structure that paid huge commissions for loan origination, based on the value of the loan, the end result was ultimately predictable this makes room for loan modification. The loans that were written are commonly referred to as "liar loans", and the upper end consequences can be read in the financial section of your local newspaper, and in the Wall Street Journal, where they've made the front page; most of the bank failures we've seen so far have come from banks leveraging mortgage driven securities. What doesn't make the papers is the impact this fiasco has on American homeowners. Millions of new homeowners, often ill educated on what, exactly they were signing, moved into homes with Adjustable Rate Mortgages, often with interest only introductory periods can now be eligible for loan modification. When those rates adjusted (with the Federal Reserve rate), or the "interest only period" ran out, those home owners suddenly saw their monthly housing bill triple. Even worse, because of the sudden price collapse on housing (and in many markets, it's nowhere near bottom, and they can't even see where bottom might be, those home owners are stuck with a mortgage that's worth more than the probable resale value of the house. This is where loan modification comes in. Loan modification is a negotiation technique, and with leg work and persistence, you can get various terms of your loan modified. This is, in some ways, like a refinance option. Mortgages are built around two terms, the interest rate and the time period over which the loan has to be paid off. The interest rate is the percentage of the remaining balance that the bank takes as a profit on each payment, and it's usually compounded. Compound interest, over the lifetime of a typical mortgage, adds up to a hefty sum of money. They don't want a foreclosure, and a loan modification is very much a case of "Well, it's this or nothing" That being said, expect the process to take at least 6 months and up to a year to happen, plan early. If you're already getting collection calls on your mortgage, the odds of getting a successful loan modification have gone down considerably.

For more information about loan modification please visit Modifications.com.