The Fear Of Foreclosure

Increasingly more of us are facing the painful possibility of foreclosure. The American Dream is turning into a nightmare.  Who’s at fault?  Homeowner?  Mortgage company?  Federal government?  Economy?   A combination of all?

Let’s look at one possible soluation:  a Loan Modification.

A loan modification might be necessary when the original loan has terms that make it impossible for the homeowner to continue making the current payment and there is a danger of foreclosure.

Loan modifications can stop foreclosures and reinstate the loan as it is being modified.

What’s in it for the lenders?

When a bank is forced to foreclose on a mortgage, it must then resume the responsibility of selling the home.  In a depressed market, the resulting sales price is generally less than the mortgage amount and it is difficult for the bank to recover the difference from the foreclosed upon mortgagee.  Modifying the mortgage is a much more attractive option because the lender won’t lose any money and will ultimately result in a win-win solution for everyone.

When the mortgage is restructured, the payments are lowered as the lender adds time to the mortgage.  The lower payments make it possible for the homeowner to stay in the home while the added time allows the bank to earn extra interest.

Requirements for a loan modification
The homeowner must want to keep his/her home and be willing to navigate the sometimes confusing process of loan modification.    The homeowner must have experienced some financial hardship. This can include loss of job, medical hardship or an adjustable rate mortgage that has increased the payment beyond the homeowner’s ability to pay.   The homeowner must have the income to be able to continue making the lower payments.

If you are facing foreclosure, don’t bury your head in the sand.  It won’t go away unless you are proactive and take the steps necessary to insure you are able to keep your home.  Your first step should be to contact the Loss  Mitigation Department of your lender.  Be honest about your situation – give them the facts. Don’t sugarcoat.  Now is not the time to put a positive spin on your finances.  They need to see that because of some hardship, you need a loan modification. But they must also see that you have the income to support a lower, restructured mortgage payment.

Despite the challenges of the process, it is worth going through if the result is keeping your home.

Rebecca Gooden