Is Hiring a Loan Modification Company a Good Idea?
As most people are aware, the country is currently going through an
economic crisis which has resulted in many homeowners finding themselves
in dire straits. The sad fact is that many homeowners simply have no
idea what they should do if they suddenly discover they are not able to
make their monthly mortgage payments. It is only natural to fear
foreclosure in this type of situation. Loan modification programs have
become more widely known thanks to coverage in the media, yet few
homeowners know how to take advantage of this type of help.
One element that has led to the confusion of many homeowners who have
considered applying for a loan modification is the number of companies
who offer assistance with loan modification for a fee. There are now
numerous loan modification companies advertising loan
modification services online. Even more confusing is the fact that many
of these companies market their services with a money-back guarantee or
as a non-profit service in order to make their services as attractive as
possible to homeowners. Testimonials from homeowners who are supposed to
have received an amazingly low fixed interest rate or a significant
principal loan reduction are also often used in the marketing process.
Such testimonials can certainly appear to be attractive, but they also
send up a red flag.
It should be kept in mind that any company that advertises a service
which appears too good to be true, probably is! Over just the last few
years alone, such loan modification companies have managed to take thousands of dollars in
fees from desperate homeowners who are terrified of the prospect of
foreclosure. In some instances, the owners of such companies have been
jailed or fined for their unscrupulous business practices. In fact,
these firms have been banned from charging upfront fees for loan
modification services in many states, including California.
Before you consider retaining a loan modification service company, you
should be aware that today there are numerous scams in operation and
that you do not need a company to negotiate a loan modification on your
behalf. You are perfectly capable of doing this on your own. In reality,
such loan modification companies can do nothing for you that you would not be able to
accomplish on your own.
If you have found yourself in a situation where you are struggling to
meet your monthly mortgage payments, the first step you should take is
to contact your lender immediately and inquire about a loan
modification. The requirements for approving a loan modification do vary
from lender to lender, but it is still important to go ahead and take
the first step of inquiring before you actually become delinquent on
your mortgage payments.
You should also be prepared to send in the proper documentation when you
apply for a loan modification program, including past paystubs, bank
statements and income tax returns. In addition, the bank may also
require a letter from you stating why you are no longer able to meet
your mortgage payments; which is known as a hardship letter. The bank
will then review your financial situation in order to determine whether
you qualify for a loan modification. Keep in mind that it is imperative
that you do not hold back any information during this process, including
high credit card bills or additional loans you may have. The bank will
pull a copy of your credit report and they will find out about all of
your debts anyway, so it is important to be open and honest in the
beginning.
The hardship letter is going to be one of the most important elements in
being approved for a loan modification. The letter should detail all of
the events that have resulted in you now being unable to afford your
mortgage. The letter should be kept short as well as straight to the
point. Remember, most banks are processing thousands of such requests
and they do not have time to review a multiple page letter. Stick to the
facts, whether it is that you have been laid off from your job, your
adjustable rate mortgage has been reset, you have had medical problems;
whatever the case may be. Restrict it to no more than two pages. Explain
how a loan modification will help you as well as lender.
Most banks today do not want to go through the hassle and expense of a
foreclosure if they can avoid it, so if you can present solid reasons
why a loan modification would benefit both parties, the bank may very
well approve it. You can find
loan modification specialists that could help you modify your loan here.
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