Homeowners Options in Preventing Foreclosure
In our current economy, many homeowners have needed to re-assay their current financial stability reducing expenditures here, paying less there in order to keep current with their monthly mortgage payments. This could have been induced by multiple reasons: spouse lost job which paid the mortgage; or instead of being laid-off spouse accepted a principal reduction in salary earnings each year, or simply your ARM (Adjustable Rate Mortgage) note rate has increased beyond your ability to make payments, etc… Either way due to the present circumstances borrowers are unable able to afford their monthly mortgage payment leading to a potential downward spiral toward home foreclosure.
In attempts to avoid home foreclosure homeowners are seeking loan modifications to reduce their monthly mortgage payment. Mortgage Servicers are able to accomplish this via a variety ways. One option maybe decreasing the note rate or interest rate of your loan. Another option, could be just modifying your ARM to a lower fixed rate. Option three could be a combination of lowering your interest rate while the lender writes-down their expected principal gains, although very rare. Either way, these are just a few options available to borrowers in attempting to modify loan by reducing monthly payment.
As the title suggest, knowledge is power, and knowledge regarding the requirements which qualify homeowners for eligibility for a modification will increase the likelihood of succeeding in this adventure. Why? As with any program if you are not eligible the reward will not be provided. Homeowners can either traditionally follow the pattern of contacting the lender personally in attempting the process of applying for the modification, or they can research the government provided assisting program HAMP and then contact their lender and negotiate terms.
HAMP, or Obama’s “Home Affordable Modification Program” assists homeowners with mortgages held by Fannie Mae or Freddie Mac. This was introduced to assist responsible borrowers who have fallen on hard times and here are some of the main requirements:
The first step in applying for a modification is writing an accurate financial hardship letter. What is a hardship letter? This is homeowners potential to explain the reasons why you would qualify for a modification and why the Mortgage Servicer should extend this available option which could mean considerable financial loss for the principle lender and it’s investors. The necessity of being accurate with language that is clear, concise and compelling will be preferable without embellishing your current situation is very important.
From here two available options remain, either contacting your lender personally or working with a mortgage professional who has experience in and successfully obtaining modifications for borrowers. If you decide to move forward with the application yourself, make sure your application is accurate and verifiable. Any false or misrepresented information will result in rejecting your proposal, which will delay the application process.
The decision in either using your own knowledge or using the experience and knowledge of trained mortgage professionals will be entirely up to you.
