Home foreclosures may be on the rise, however, there are steps you can take to safeguard your property in troubled times. A loan modification is a viable option to reduce an overburdening monthly mortgage payment and may be the single most important resource to gain some breathing room under the debt. Professional companies, such as mortgage brokers and loan modification specialists are of value, however, the average distressed borrower need not pay the costly fees and may complete the loan modification by themselves.
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Despite the their reputation for adhering to strict rules and policies, many lenders are understanding of the current financial climate and are eager to work with a home owner facing a default. The lending institution's best interest is to keep the borrower in the property and offer some resolution to the mortgage payment crisis.
To perform your own loan modification, be sure you have the right contact person with your mortgage company and be ready to submit all your information per their request. Time is of the essence, and you must be sure to gather all your receipts and documents in compliance with the lender's time line.
A home loan modification is designed to restructure the existing loan, thus bringing down the monthly payments to a more manageable amount to allow the borrower to remain in the property. A qualified candidate for the modification may have suffered a temporary job loss or reduction in wages, is new on the job, undergone a divorce, hospitalization, filed for bankruptcy or is suddenly upside down on the loan due to a skyrocketing interest rate.
The lender will ask for a statement of hardship, a page that is handwritten by the client and detail orientated regarding their unique financial situation. Upon review, the lender will then ask for paycheck stubs, bank deposits and statements, and verification of the current household income from every person mentioned on the title of the property. Although financial hardship is relevantly easy to prove, be aware that most lenders do not work with clients that have fallen into extreme debt with credit cards. In such cases, the loan modification candidate may best be served by filing a bankruptcy or participating with a debt consolidation program.
Once the documents are in order and turned in on time, the loss mitigation specialist will shop for a lower interest rate on the mortgage or seek to find a new lender to purchase the loan. During this time, the monthly mortgage payments may not be due until the loan has been restructured and finalized. Exceptions to a loss mitigation claim may include a borrower that has been unemployed for a prolonged period, one who is now disabled and cannot return to work, or one who makes enough income to carry the existing mortgage payments.
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