Arranging a Mortgage Loan Modification the Easy Way

June 29, 2009 by Julio
Filed under Loan Modification

A mortgage loan modification is a means of rearranging your mortgage so as to enable you to more easily make the repayments, frequently by means of a reduced capital. Many people come across the home of their dreams, and work out their finances persuading themselves that they can afford to buy it. However, things happen and they eventually find out that they can’t, but by then it is too late.

There are many reasons for this happening, although a common one is that you love your new-found home so much that you persuade yourself that you will cut down on this, and stop that (such as quit smoking) and you will easily save enough money each month to make the repayments. However, no matter how well intentioned you were, it just doesn’t happen. This doesn’t get cut down, and you don’t quit smoking, and you suddenly find that your dream has turned into a nightmare.

Another common reason is purchasing your home when both house prices are high and interest rates low. One frequently leads to the other: People tend to pay more in capital for their home when associated mortgage interest payments are low. The time comes when interest rates increase, and prices drop, so that not only do you have to pay more each month, but also you could end up with negative equity: owing more on your mortgage than the house is worth at the time.

Sure, times will change, but you might not have long enough to wait. You can’t get a loan on your home to help you through the bad times, because you have no equity, and your repayments have increased to a level that is severely straining your finances. Oh, for some way to reduce your monthly payments to help you out.

Don’t worry - you are not alone. There are many like you, and thankfully there is a possible way out of your predicament. However, it is a way that the banks don’t generally want to discuss with you, so you have to know how to negotiate it. It is called a loan modification, or in your case, mortgage loan modification.

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A mortgage is nothing other than a cash loan, with your home placed as security. If you fail to meet the repayments, your house will be repossessed by the lender and sold to pay off the loan. They are not interested in making profit on such sales: they will sell as soon as they get a bid large enough to pay your loan, so even if you could have sold it yourself for a lot more, they aren’t bothered. They get their capital back, and you get nothing.

So, please look upon your mortgage as a loan. May people regard their mortgage as something special, and while to them it may be, to the lender it is just a loan of money to enable you to purchase your property, with that same property as security. That’s why the lenders will keep the title deeds until you have paid it off.

You could try to negotiate a mortgage loan modification with the bank yourself. Most people, however, are far from confident negotiating with their bank manager, or even a building society or private lender. They don’t know the jargon, and they get exceedingly nervous. Not only that, but banks generally don’t discuss such things with individual members of the public, and might make a few sympathetic noises, and then sell your house!

You could hire a specialist, but I am pretty sure that if you had the spare couple of grand that they will charge, then you would have used it for your monthly payments. That’s another of those life’s paradoxes - you need a lot of spare cash to pay a specialist to deal with a problem caused by your (let’s face it) poverty. It ranks alongside not getting a loan unless you are solvent enough not to need one!

The third method is to do it yourself, but unlike the first option above, armed with the right information and the right forms. Yes, forms. If you have the correct forms properly completed, and know the information that your lender wants in order to be able to agree with your request, then you have a chance of success. Otherwise forget it. You’ll be sent on your way with your tail between your legs.

However, with the right forms, and the confidence that comes with knowledge and knowing the right questions to ask, and points to make during your negotiation, you are very likely to be successful, and leave the building, not with Elvis but with a mortgage loan modification. Not only will that save your home, but it will save your credit record which is probably equally important these days.