Home Loan Modifications

Published by julia | Filed under Buyer / Seller Tips, Market Trends, Miscellaneous, Real Estate, Shout Outs

Home loan modifications are designed to save homeownership, but they’ve also created a new mortgage maze pitted with “buyer bewares.”

Both government- counseling agencies and local community service agencies admit they have been swamped by the demand for loan modifications due to the real estate crisis. The demand stems from an increase of federal, state and local level foreclosure relief and bailout efforts from not only the government but the private lending industry as well.

Mortgage modifications have been around for many years, but the recent relief efforts have raised the awareness of the mortgage modifications as an alternative to foreclosures, short sales, auctions, and bankruptcy. The demand has opened the floodgates of modification services now offered by real estate agents, mortgage brokers, attorneys, government agencies, lenders, and many other professionals alike.

Homeowners seeking modifications of their mortgages are at the mercy of lenders at this point. The workouts are often voluntary and completed on a case-by-case basis, they frequently come with no standardized procedures or guidelines. Many homeowners are finding it tough to know when a modification will work and how to even obtain one.

So what is a home loan modification exactly? A home loan modification is given only upon the existing lender’s approval, and permanently reworks the terms of an existing mortgage in order to make the loan more affordable to the homeowner. You can see why in the crisis that we are in, this could be the light at the end of the tunnel homeowners are looking for.

They are generally fee-free and involve the lender lowering the interest rate some and possibly changing an adjustable-rate mortgage (ARM) to a fixed rate mortgage (FRM) with a 30-year term. Some form of homeownership counseling generally comes with the deal. A mortgage modification is not a refinanced mortgage.

A housing or credit counselor can help you determine if a home loan modification is in your best interest and is even an option. You must be prepared to hold down your current mortgage terms for the 60 to 90 days or more it could possibly take to complete the modification, due to potential complications and document processing times, especially in the foreclosure and short sale process we are currently in.