New Home Loan Modification and How to Negotiate a Modified Loan with your Lender

New Home Loan Modification and How to Negotiate a Modified Loan with your Lender

One of the major programs launched by our new president was helping debt-strapped homeowners with a loan modification plan. Although loan modifications have been around for years the government has introduced new incentives for lenders to approve restructured loan packages. “Making Home Affordable” focuses aid to those homeowners who cannot afford to pay their mortgage and those with little to no equity in their home. And although it’s main purpose is to save homeowners from the brink of foreclosure it can also help individuals who see the need to reduce their debt load.

Do You Qualify for a Home Loan?

So how do you seek help for this loan modification? First you must determine if you meet the government’s criteria.

· This program is available to those homeowners who have proof they are unable to continue paying their mortgage due to financial hardships. For the borrowers who have either missed mortgage payments or those who are barely hanging in there and are about to begin missing payments, you should call your lenders and explain your situation.

· The government guidelines do stipulate that loan modifications are only available to those homeowners who acquired their mortgage before Jan. 1, 2009.

· The home must be your primary residence.

Once your lender determines you meet the guidelines for a loan modification they will then decrease your mortgage interest rate so that your monthly payment will be reduced. The lender will review the interest rate and your income and reduce the rate to ensure it’s not more than 31% of your household income.

Now all of this sounds easy and many lenders really help the homeowner to work out a sound plan to keep their home – and then there are those lenders that don’t make it so easy. This should not deter you from negotiating a loan modification with the lender. Why give up on your dream and all the work that went into securing your property. A plan is your best defense.

1. Sit down and really review your finances. Not just the major expenses of owning a home but what are your overall expenses including utilities, maintenance, insurance and taxes if they are not included in your escrow account. How much are you paying in bills and how can you cut your costs? These are questions your lender will ask you so be prepared.

2. If your lender lowers your interest rate and gives you a lowered amount to pay each month will you be able to keep up with these new payments? Have a clear concise answer of how a new rate and payment plan can ensure they will receive their money. Having complete confident answers will show the lender that you’ve thought this through and you are committed to saving your home.

3. If your hardship is only a hiccup right now and you foresee your problems being eliminated soon, ask your lender for a postponement of payments and how you propose to overcome the problem and catch up.

4. Seek the advice of a real estate agent and ask for the market indicators in your community. How many homes are up for foreclosure? What is the cap on sales in your neighborhood? Perhaps the lender will see that its better to work out a plan with you rather than losing money by foreclosing.

The best advice is to work up a plan of defense and try and work with your lender to find common ground. Lenders do not want to spend the time, effort and money to foreclose on any property. It’s much more time-intensive and expensive than simply working out a loan modification plan with the homeowner, so you’ve got the upper hand. Just be prepared and show your commitment to saving your home.