AS our economy continues to crumble, foreclosures continue to rise at an unprecedented rate. Distressed homeowners struggle to keep their homes as they desperately look for possible solutions. A lot of people are trying to get their loan modified by their lender but for most, the process has been extremely frustrating.
A loan modification is simply changing one or more terms of your loan that allows you to bring your account current (if you are delinquent) and to make your payment more affordable. It is not the same as refinancing where you need to obtain a new loan to pay off your current loan. Thus, it doesn’t require that you have "good" credit. As a matter of fact, people who need loan modification are usually people whose credit has already been damaged by late payments. In loan modification, the terms that can be changed depend on what type of loan you have. For example, if you have an adjustable rate mortgage (which is what most of the problems loans are), you may be able to change your loan to a fixed-rate loan. If you have a fixed-rate loan, you may be able to lower the rate so that the payments can be lowered accordingly. In some cases, you may extend your loan term from 30 to 40 years. Principal reductions, though rare, may sometimes be granted.
Although you don’t necessarily need an attorney to do a loan modification with your lender, having an attorney negotiate on your behalf does have its advantages and may significantly increase your chances of success. The reason is that the loan modification process requires a careful analysis of your circumstances, facts concerning your finances and the property in question, an understanding of what your lender may be looking for and most importantly, legal options that may be available to you if all else fails. Sometimes, what also further complicates the process is that the decision is not always made by the lender who owns the loan. Instead the decision is made by a group of investors who own a part of the mortgage-backed security. These investors decide based on what helps them further reduce their losses, not based on what serves you best, although your "hardship" impacts that decision. Thus, it is not only important to present a strong case to the lender in order to get your application approved but it is just as important to have an attorney on your side who can help protect your legal interests during negotiations with the lender.
A lot of people also get frustrated trying to do it on their own because the process requires a series of time-consuming phone calls made to the lender, hours of being put on hold and speaking to lender representatives who don’t even understand your file or know what they are doing. In my opinion, a lot of these lenders are terribly understaffed or poorly staffed with individuals who are often overburdened with more files than they can handle. So unless you are adequately prepared with the right information to present your case and able to effectively communicate to your lender why a loan modification is in their best interest, you are probably wasting your time and not helping your situation at all.
There is no telling where this current economic crisis ends. The Obama administration has recently unveiled a housing plan which includes financial incentives to lenders who will work with borrowers to voluntary modify their loan. Given the scale of the crisis, the question still remains whether this will be enough. A few lenders have at leas already expressed willingness to modify loans for borrowers who meet certain criteria.
A loan modification is only one of the many options that may be available to you if you are struggling with mortgage payments and/or facing foreclosure. Again, consulting with an attorney may help you explore options you didn’t even know existed. For a free consultation, please call our office at Toll-Free 1-866-477-7772. We have offices in Glendale, Cerritos and West Covina.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped more than 4,000 clients in finding solutions to their debt problems. To schedule a free attorney consultation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772. (Advertising Supplement)
( Published on March 18, 2009 in Asian Journal Los Angeles p. B3 )
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