(Best Syndication News) As the unemployment rate spikes the need for loan modifications is on the rise. In some cases the bank may be limited in this process, but it may be worth a try if you are going to be behind on payments or delinquent. The bank may have sold the loan and is just providing services for the owner.
You can speak to a credit counselor certified by The Department of Housing and Urban Development (HUD) for free. Talk to these professionals about loan modifications before you talk to your bank. You can also contact a non-profit Consumer Credit Counseling organization.
1) Besides modifying a loan, there are some other things that can be done to save money. Contact your cable or satellite TV provider. In some cases the company may have a new plan available that can save you money. Contact the phone company and see if they have a better option. It doesn’t cost anything to call. In some instances credit card companies will lower your rate.
2) Take a good look at your finances. Figure out how much money you are paying out and write it down. Create a log of your payments. Determine the difference between your income and your expenses.
3) Prepare an initial proposal to the bank. This could open the door to a negotiation. A counselor may also help you negotiate with lenders.
Loan Modifications
If you have an adjustable rate mortgage that is getting ready to reset and you are certain that you can not pay the monthly payments, you can request a loan modification. They will likely ask you for a complete financial history. The bank may be able to create a fixed rate solution for you.
If the lender does not modify the loan permanently, they may be able to lower your interest rate for a limited time. For instance, if your rate was going to jump to 10 percent, you might be able to get a 7 percent fixed rate for 5 years. In some rare instances, banks could lower the principal amount.
Forbearance
Forbearance means that the bank will temporarily suspend the payments. They might do this if you lost your job and have a new one starting in the near future. The bank may also consider this if you were hit with some medical bills or other emergency.
Don’t expect the bank to forgive your payments for more than a few months. The bank will want the payments to resume and the missed payments made up.
Legal Solutions
A legal challenge may be your last resort. If you are unable to negotiate with lender and there was a mistake or misrepresentation made in your loan, an attorney may be able to convince a judge to grant you a favorable decision.
Perhaps the lender did not disclose the Annual Percentage Rate (APR). The interest rate could be inappropriately high. Maybe the borrower was unaware that the mortgage will adjust upward (an adjustable rate mortgage ARM).
It is best not to wait until you are three months behind on your payments before you contact your lender. If you are granted a modification, make sure you make those payments. Check your credit reports for mistakes before you contact your lender.
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