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Loan Modification is Vital to Correcting the Foreclosure Problem

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By : Julie Thompson    99 or more times read
Loan modification following certain guidelines and is vital to the problem of correcting the foreclosure problem. An explanatory list has been released by the Ralph R. Roberts, a consumer advocate of Federal Loan Modification Law Center. It tries to remove certain common false notions about loan modification so that the borrowers become better educated and thus be able to prevent foreclosures.

There is a wrong idea that the banks and other lending bodies like and prefer to foreclose on borrowers. In reality banks do not want to take away the foreclosed units because by doing so not only does their monthly income finally stop coming in but also they are saddled with the task of looking after vacant properties. They have to pay fees to attorneys during the running of the foreclosure process, rehabilitate it and then try to sell it and that requires payment being made to selling agents.

Another wrong idea is that one cannot qualify for a loan modification because of a low credit score. Here the personal credit score is not a factor when applying for loan modification. It is required when the question is of refinancing. Loan modification means the adjustment of the terms of the contract and reducing the balance that is due. In reality the credit score will improve if the loan modification steps meet with success and one avoids bankruptcy or the ignominy of foreclosure.

The third erroneous conception is that only the delinquent homeowners are qualified for loan modification. Hitherto the stipulation was that one had to be lagging behind two months in mortgage payments to qualify for loan modification. But lately the banks as well as many other lenders are developing a type of loan modification scheme that can be availed of even by those who are current in their payments. The specific case of the individual has to be discussed with either the lender or a lawyer.

A big mistake is to nurse the idea that it is more advantageous to opt for bankruptcy or to abandon the house rather than go for loan modification. Lenders have the choice of filing a deficiency judgment on the borrower if the house is abandoned to collect the balance payments.

Many shy away from loan modification thinking that those who have already been served a foreclosure notice cannot avail of it. If the borrower is still living in the unit and if it has not been sold then there is the chance of availing of loan modification, despite the foreclosure notice being served.

The key point is to act without delay as soon as one senses approaching foreclosure.
Julie Thompson, has been working on studying the foreclosures market, helping buyers on the finer points of foreclosures. Read about the following article Loan Modification is Vital to Correcting the Foreclosure Problem.

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