Loan Modification: Is it Hype or is it For Real?

If you’ve been paying attention to the news at any point over the past six months, you’ve of course heard about the terrible economic, credit, and mortgage crisis that we’re in. If you’ve been personally affected by it, then of course you haven’t had to hear about it from the news. You’re experiencing it first hand right now.

For homeowners facing foreclosure, or who are worried about their ability to keep up with their mortgage payments in the near future, there don’t seem to be many good options to pull you out of this mess.

The irony of this whole situation is this though -- that may actually have been true a year ago or even just six months ago. But as things have deteriorated even further, the situation for homeowners in trouble has gotten better, not worse.

How can that be, and what do I mean? Let me sum it up like this. In normal times when a homeowner can’t keep up with her payments, banks don’t have a problem for closing on the property. They never really like to, because foreclosing home never gives the bank account of profit they would get if you just stayed current and made your payments every month.

But when times are as bad as they are now, the banks are literally being driven out of business by foreclosures. I won’t get into the nitty-gritty detail why this is, but what you need to know is that banks pay a hefty penalty when they foreclose on someone’s home.

It’s this penalty that is driving banks that have been in business for over a century -- like Washington Mutual -- completely out of business. It’s not like they all of a sudden stopped making money completely. It’s that they simply couldn’t handle having to pay these penalties for all the properties that were going into foreclosure.

So can you see where this is going? The banks desperately want to avoid foreclosure. So what they’re turning to is something called loan modification.

And this is great news for homeowners like you and me. What this basically means is that banks are willing to work with people who are behind now, or who may be behind in the future, to modify their loans to work out a payment that you can afford.

Now, you need to realize that this is not refinancing. A loan modification involves working with your current lender to change the terms of your current loan.

Around a 30 million homeowners in the U.S. qualify for a loan modification right now. But most have no idea that it’s even available, and fewer still no how to approach their lender properly to have their loan modification approved.

The crux of a loan modification involves a homeowner being able to demonstrate that they are, or are in danger of, going backwards every month -- which basically means that you’ll be paying more than you’re bringing in.

This doesn’t just include things like your mortgage. You can add a new credit card bills, student loan payments, car payments, etc. to prove your point.

It also doesn’t mean that you have to currently be behind on your mortgage to qualify. The banks are so skittish right now about a homeowner even approaching foreclosure, that they want to work with customers who are even in danger of having issues.

While it is possible to approach her bag on your own about a loan modification, the safer way, in my opinion, is to hire someone who knows exactly what they’re doing. Ideally this would probably be an attorney who does nothing except loan modifications.

It’s this kind of professional who makes the banks stand up and take notice. Below I have a few resources that I recommend you check out if you think that a loan modification might be something that can help.

I’m sure these will help you get everything sorted out, and get you back on the right track. Good luck and let me know how you do.