Obtaining a debt modification is one way that a consumer can avoid a sheriff's sale. Not all homeowners qualify and not all mortgage servicers are participating. But, if you are struggling in paying your mortgage, it is worth your time to call your banker and find out what options they offer. You may not always get the answer you are looking for, but once you get the right person on the phone, you will drastically increase your chances of saving your property and prevent an eviction.
A debt modification can take many shapes. It is a permanent alteration in the original arrangement made between you and your servicer. In other words, it's not a temporary fix, like a workout plan or forbearance agreement; it's a permanent plan that will endure for the life of the mortgage. But you must realize that most bankers will not agree to a loan modification if a temporary fix would also solve the problem. When discussing a loan modification, you will need to explain your problems in the best possible light. This is why a smart homeowner would take the step to hire a professional to negotiate with their lender, rather than attempting such an important task on their own.
The items that can be changed include the interest rate, the length of the loan, the size of the monthly payments and the total of the principal, but only in uncommon situations is the principal reduced. Usually, changes are made that increase the total debt in order to cover any over due amount or other charges that could result in a lien being placed on the property. If a principal reduction is necessary to make the loan manageable, and it can be justified by a market value that has gone down since the purchase, then an adjustment can be discussed. In every case of a modification, we recommend acquiring a BPO (Broker Price Opinion) or a Property Valuation to clarify the current value to your lender. A full value assessment is costly and generally not necessary. The two alternatives we have just mentioned above can be purchased for around $100 and should adequately document the value to your banker.
Mortgage institutions all have waiting periods. Some banks seem to take longer than others to respond to their customers. Bank of America, for example, has been mentioned in hundreds of accusations to the Florida state attorney general for failure to act promptly when contacted by homeowners. It's crucial to not just sit back and wait for your banker to take action. You need to be very proactive by checking up on them regularly and making sure you have submitted all the paperwork they requested.
Typically, a mortgage company will offer the home owner a "trial period". If you are offered a trial, you will be required to make your payments on time for three months consistently. Some servicers allow you to make the modified, lower payment. Others ask for your current payment, whatever that may be. Many situations we see, start with a workout plan and then the loan is modified after the first three payments. A workout plan is when you make your regular payment, plus an additional sum that is applied to the over due amount. This type of plan requires you to make three higher payments until the loan is modified.
A major problem with agreeing to these conditions is that you are relying on your lender to actually alter your payment schedule three months later. In our experience, lenders infrequently follow through; and will say almost anything to try and collect cash owed to them. Taking them at their word is never a good idea; so require they put everything in writing and follow any plans you've agreed to. It is important that you never agree to a modification, workout plan, or repayment plan that is not affordable.
In the long run, a loan modification is probably the best option you may haveto keep your property and stop foreclosure, so don't just sit there worrying but get started today. Your first action is to call your banker and ask them for possible options to stop foreclosure. They should have a standard loss mitigation package for you to complete and return to them. If they don't reply favorably, or worse yet, don't respond at all, then you really should hire a professional to negotiate on your behalf.
When the dust has settled and everything is over, you'll know you did everything possible to fight eviction.
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Nick writes articles on how to stop foreclosure. To learn more about numerous ways to save a home, before or after a sheriff sale, you can visit his website online here: www.foreclosurefish.com/
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