A Fresh Start with a Mortgage Restructure

In the midst of these economic hard times, failing banks are more motivated to offer loan modifications to their troubled and delinquent borrowers. The government is strongly encouraging lenders to offer their existing borrowers loan modifications to help avoid foreclosure. Your lender may agree to lower your interest rate, lengthen the loan term and even forgive some principle balance to arrive at a long term, affordable payment so you can stay in your home.

A loan modification involves a negotiation with your current mortgage lender(s) to restructure your mortgage loan. Loan modification can involve a reduction in loan payments, interest rate, or even the principal balance. A loan modification should be employed if you're facing foreclosure, you have an adjustable rate mortgage (ARM) that is about to adjust or has recently adjusted, the equity in your home is less then 5%, and you have had recent financial difficulty but are now in a position to pay as long as the mortgage payment is reduced.

A loan modification can help you get a fresh start with your lender and help you get your finances back on track. With a loan modification, the lender turns a delinquent account into a performing asset. If you're interested in a loan modification, the best time to start is now. The quicker you start, the better it is for you. The loan modification process is lengthy and requires a lot of persistence, patience and advanced preparation. But, it can help reduce daily stress and their job is to put a plan together that will help stop foreclosure.

If you are considering a loan modification, you can do it yourself. But, it is extremely complicated. If you are persistent enough to get a hold of your lender's loss mitigation department, you probably won't get the best possible deal. Your best bet is to get an experienced real estate lawyer that specializes in loan modifications. While this will cost you extra money, it's worth it.

To start with, the lawyer will get a complete written life of loan history to see all the charges and fees included in your mortgage balance. Consumers can miss vital details in this loan history that could be a valuable bargaining chip in negotiating a loan modification because they don't know the ins and outs of real estate law. Plus, the attorney will examine your loan documents for potential Truth in Lending Act (TILA) or Real Estate Settlement Procedures Act (RESPA) violations and there wasn't fraud involved on behalf of the lender or broker that originated your loan. Because the lawyer is intimately familiar with the laws, he or she will be able to spot any red flags that you would most certainly miss.

If you have been denied a workout from your lender this is not the end of the line. In response to the foreclosure crisis, the Department of the Treasury has coordinated an alliance of mortgage industry participants called HopeNow.com. The goal of the alliance is to provide foreclosure prevention counseling and to coordinate mortgage restructuring or "workouts" as increasing numbers of mortgages reset to higher payments. Plus, you may be able to refinance under the Federal Housing Administration (FHA) Hope for Homeowner Program. It became effective on October 1, 2008. It is specifically designed to help homeowners facing foreclosure refinance into low, fixed-rate loans that are insured by the government.

Plus, if you're a Countrywide Financial Corporation customer, you may already be eligible for a loan modification due to the huge lawsuit against them for predatory lending practices. Under the settlement, which is the largest predatory lending settlement in history, the mandatory loan modification program will provide immediate relief to homeowners who were put into the riskiest types of loans.

The Countrywide program will cover borrowers with subprime loans, including hybrid loans with teaser interest rates, and the toxic prime loan product known as the pay-option ARM. For eligible borrowers, the interest rates on the loan modifications could go as low as low as 2.5 percent for five years. Pay-option ARM loans will no longer contain the negative amortization feature and their principal and interest rates will be reduced. Countrywide customers who believe they are eligible for the program can find program information at countrywide.com, or can call 800-669-6607.

More than 50% of foreclosures would be avoided if people contacted their lender. So be proactive and aggressively pursue all options you have. For more information about loan modification and other debt relief options, contact us now.