Home Loan Modification: Options Homeowner's Can Understand

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) July 2, 2009 -- Forbearance, Principal Reduction, Interest Rate Reduction, and Recapitalization

Home Loan Modification is the alteration of one or more of the terms of a mortgage. The result of the alteration is to significantly reduce the monthly mortgage payments to a level that the borrower can afford. This helps when the borrower has less income from a reduction in salary or job loss, or increased expenses from an emergency like a medical hardship. The goal of a home loan modification is to keep every borrower in their home, reduce their mortgage payment, and avoid foreclosure. There are different types of Home Loan Modifications:

Home Loan Modification Options

• Forbearance

• Principal Reduction

• Interest Rate Reduction

• Recapitalization

Home Loan Modification Forbearance may be the method preferred by the lender. Forbearance is when the borrower pays the outstanding arrears and the lender allows the homeowner to stay in their home without foreclosing on them. While this may seem like the borrower allowed the homeowner off the hook, usually this is not the case. Statistics have shown that homeowners whose mortgage is too high as compared to their income will eventually lose their homes through a foreclosure. Thus forbearance is really just delaying the inevitable. The only time this may actually be good for the borrower is if their income will soon increase and the bank waives all of the outstanding penalties and interest on the penalties.

Usually, if the borrower doesn’t have enough income to keep paying, the lender will have already set up the foreclosure and it will happen swift and hard for the borrower. While this is not a recommended solution for the homeowner, it can be very profitable for the lender if in fact the amount owed is less than the lender can sell the house for in the open market.

Home Loan Modification Principal Reduction is when the amount owed is actually reduced by the lender. Something like this has not even been considered since the Great Depression, but there has been recent legislation that has made its way through congress authorizing a judge to cram down the price, actually reduce the principal amount owed by the borrower if the judge feels that the houses value has plummeted so badly that it is the only way the borrower can remain whole. This is a very borrower friendly bill and has been stalled in the U.S Senate. This bill may never pass the Senate in its current form, unless the economy takes a big turn for the worse. Lenders usually will not voluntarily grant a Home Loan Modification Principal Reduction on a first mortgage, but a good attorney may be able to negotiate one with a lender who has a second or third standing loan on a home.

Home Loan Modification Interest Rate Reduction is where the lender reduces the interest rate on the loan. This is a very popular use of the home loan modification program, especially now that interest rates are low. If the borrower has been responsible and making payments on time but has run into financial difficulties due to a hardship, these loan modifications are part of the government mandated home affordability program. If a borrower has been late or has had trouble making their house payments, an attorney can probably help, even though they are outside of the government guidelines.

Home Loan Modification Recapitalization is a term used to denote the situation where a lender allows the borrower to stay in the home even if the borrower has been past due on their payments. The lender simply adds all of the arrears into the capital balance owed on the loan. Alone this doesn’t actually help the homeowner get out of trouble, but combined with the rate reduction program as mentioned above, can make this combination the one - two punch of a good home loan modification.

Home Loan Modification and Refinance are used by lenders and borrowers all over the country today. Now Every Homeowner can understand their options, it is the standard practice. As with all major financial decisions, you should consult with an attorney before signing any documents related to the mortgage on your home. There really is no substitute for good legal advice.

Where to Go for Help Regarding Home Loan Modification:

HomeLoanModification refers its inquiries to attorneys that will offer a free consultation regarding a Home Loan Modification.

Homeowners seeking a home loan modification should be aware that there is free help available from non-profits and government-affiliated agencies in most communities - you can go online and seek them out. A listing of these non-profits and government affiliated agencies will be forthcoming at http://HomeLoanModification.dyndns.org

More information can be found online at http://HomeLoanModification.dyndns.org

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