Loan Modification
Loan Modification
A loan modification is when a bank negotiates the terms of your mortgage agreement. This usually affects your payments. It can also affect your principal balance. If you want to keep your property, this is your best option in 2010. It is very cost effective and may be the best way to reduce your expenses that you have ever experienced. I have seen average homeowners with average mortgage payments reduce their mortgage payments by hundreds of dollars.
Although this is an ideal solution to foreclosure, you must be aware of some of the pitfalls. Here are some tips to help you decide if loan modification is right for you…
- Income and Expenses – Assess your monthly cash flow honestly. You have to have enough income to afford the new payment, but not so much income that you can easily afford it. If the bank sees that your income is high in comparison to your expenses, they will assume that you can afford it without a modification and the bank will not take an unnecessary loss.
- Take immediate action – The sooner you do a modification, the sooner you will start saving several hundred dollars per month.
- Seek professional help – Should you go this alone you may find yourself getting frustrated and give up. This is not an easy task but it is so worth it. Let’s say you save $200/mo, you keep the property for another 5 years, and then you sell. You would have saved $12,000. How many hours do you have to work to make $12,000? If you hire a lawyer or other loan modification expert, you will probably save more than that, and that additional savings will more than cover their fee. Click here to see a do it yourself loan modification resource. If you want to hire someone, contact me.
- Decide if you should be making payments – Some banks will not consider a loan mod unless the consumer is behind a couple of months in their payments. Some banks will do it without being behind. You can ask your bank if you are attempting this on your own or ask your loan mod expert for their professional advice if you have hired someone.
- Save your credit – The best case scenario is that you never fall behind in payments and the bank agrees to a great loan modification with you. If this happens, you did not harm to your credit as a loan modification is not a negative factor on your FICO score. If you do fall behind in payments, get your mod done ASAP. Every month that goes by without you paying, exponentially damages your credit.
- Know your options – Is it better to short sale your home or do a loan modification? It depends if you want to keep your property. If you want to keep it, try a loan mod first and a short sale after wards if the modification didn’t work. If you want to sell your property, try a short sale first and if that doesn’t work, resort to a loan mod. Either option should WORK. It is usually a matter of who is working it. If you really know what you are doing, the option you prefer will most likely work out. If you are not sure about what you are doing, hire a loan mod expert and you will probably get it done and save more money. There are 2 reasons why a loan modification or a short sale would not work out… 1. The property owner loses interest and/or gives up 2. The bank is not interested and would prefer to foreclose (very rare).
- Do not “bring your account current” – If you are behind in payments, do not fall for the banks collections tactic in telling you that you need to catch up in your back payments before they will consider a loan modification.
- Learn loan mod negotiation tactics before applying for a loan mod – Banks will oftentimes send a property owner a mailer that says, don’t work with a loan modification expert: call us direct so you don’t get scammed. While that is true that there are a lot of scam artists out there and you should use caution in selecting a professional to help you, the real reason they say this is because they know that you will save a couple hundred dollars more per month if you know the ins and outs of negotiations. They want you to call direct so they can call the shots. If you get educated, you can call the shots. Seriously!!! At a minimum, you should get educated on line or grab a book from the library on loan modification. If you need help contact me or at least check this website by Mike Rockwood to get some tips and ideas.
- Make sure you qualify – This is an in-depth factor that needs to be addressed before you spend any money or alot of time. You need to take a good look at your real monthly cash flow. If it is too strong, a bank will not consider a loan mod. If it is too weak, they will not consider a loan mod. It has to be just right. A good way to assess this without much effort is to ask yourself if you really need help? If you are doing it for the wrong reasons, it will not work out. If you are doing it for the right reasons and a few hundred dollars per month would make the difference between you keeping the property and losing it to foreclosure, you will probably qualify.
- Withdraw money from any bank accounts you have with the mortgage company - Depending on the mortgage documents that you signed at closing when you bought the property, they may be allowed to withdraw funds from your bank account to pay for delinquent mortgage payments.
- Don’t say too much – This goes back to negotiations. They record your conversations and they can use it against you. Whenever they ask you something you don’t want to answer, just say “I’ll have to get back to you on that, I have to check with my partner” (meaning your loan mod professional).
There is a lot more information I would like to cover with you but I would need to know more about your situation specifically. I work for McHenry County’s #1 Foreclosure Company, Exit Platinum Realty. All we do is foreclosures. We specialize in short sales and loan modifications. We have helped over 100 families stop foreclosure and move on. We are very reasonable and charge much less than your typical loan mod lawyer and yet, we do the same thing. If you would like a personalized, free analysis of your situation, I can help. Just send me an email with more information on your situation at nick@nickgraff.com. Some foreclosure consultants charge $150 for this service and I am willing to do this for free.
Maybe you are just curious right now and exploring your options. I run a “Foreclosure Help” forum which is designed for owners and professionals to share tips, strategies, advice, and experiences with each other. This is free and you are welcome to join this facebook group by clicking here.
Another option you have is a “do it yourself” program. These will usually run you $100 or so and they are usually experts at loan modifications but offer their services online via video, audio, teleconferences, and/or email support instead of in person. The best one I have seen is Mike Rockwood. Click here to see his loan modification specialist website.
Hope this helps,
Nick
