With a record 3.8 million foreclosures filed in 2010 the Government has become increasingly eager to see this number drop. But how successful have the loan modification programs been and how can you ensure that your own home loan modification is approved?
Despite attempts by the Government to have more home mortgages modified most people are still not benefiting from these programs. The Home Affordable Refinance Program (HAMP) originally aimed to help between 3 – 4 million home owners take advantage of new lowered interest rates. However as of 2011 only 750,000 home owners had actually had their home loan modified.
However the benefits for those that have managed to get their home loans modified have been significant. Modifying the loan so that you pay the current interest rate of approximately 4% can save thousands off of your interest rate bills and help to avoid foreclosure.
The reason that only a relatively small percentage of loans have been modified has been the slowness to act on the part of lenders. With a large back log of cases for the lenders to work through it is up to the borrower to take the initiative.
The good thing is that provided you give your lender what they want to see there is a good chance that your loan will be modified. The process can be slow but if you are patient and are willing to work through the steps required you will find that you should be able to hold onto your home.
Let’s now take a look at what you need to do to have your home loan modified:
Before any Home Loan will be modified you need to demonstrate to your lender that you are incapable of servicing the loan according to the original terms when it was signed. Generally Lenders will not even discuss modifying a loan unless it is severely delinquent which means that you have not serviced your loan for at least 90 days.
Once you find yourself in a situation where you are no longer able to service your current loan you will need to take the following steps:
Provide a Hardship Letter A hardship letter details the reason why you are unable to service your loan. Begin the letter with the basic details of the loan and then led into why it is that you can no longer pay the loan. For example if you have lost your job or have been forced to take a job at a lower pay rate then you should include this information. Essentially you are detailing what has changed between when you took out the loan until now that has forced you to be unable to repay.
Include Any Illness If you have been ill or had an accident that has contributed to your inability to pay the loan you should definitely include this information. Sickness related claims for a modification are almost always approved if they can be verified.
Include Unemployment Details If you have been on unemployment then include verification of this. As with illness being unemployed is very good grounds for needing modifications to the loan.
Explain How The Modification Will Help Lenders want to see how having the loan modified will help the situation. Detail how you will be able to service the loan once it has been modified. For example you could show how with a lower interest rate you will be able to meet the payments on your existing income.
Include a Financial Statement Lenders want to know that you have no other assets that you could tap into to help pay for your loan. Basically you want to present a poor picture of financial health and so if you have any debts include this on the statement as well.
Show Your Income and Expenses List your income and your expenses. You want to show how given your current expenses you cannot meet the loan payments as they are. This includes all of your expenses not only those relating to the property.
Finally you should consider hiring a lawyer that specializes in loan modification. Dealing with the process can be difficult and takes time. Having some one to talk to your lender can help speed the process and make you feel less vulnerable. If you choose to undertake the loan modification process you be patient and understand that many other people are in the same situation.