Getting A Debt Modification Vs. Re-writing Your Home Loan

By Author: Nick Adama
Total Articles: 197
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A lot of consumers think that re-writing your loan is the only resolution when they are attempting to halt foreclosure. This is sometimes good advise; if you have equity in your home and if you re-write your loan before your credit score is destroyed from the missed payments. The problem is that many people don't fall into this category. Most foreclosure victims have very bad credit and no assets. This means that too many property owners who are facing legal action are wasting valuable time trying refinance their loan.

The best option is a mortgage modification with your present bank. This is when the terms of your present loan are adjusted to produce a lower monthly payment. In essence, it's just like a refinance, but your credit and equity are not a major determining factor, like a refinance. In most cases, the interest rate is reduced and the term of the debt is re-figured to a 30-year fixed rate. It may be the case that the total debt amount is even adjusted down to reach the manageable monthly installment figure.

It may be that by simply contacting your lender for a debt modification will work. But ...
... most of the time, you will need to hire a professional negotiator to work on your behalf. When you talk with a professional, make sure you don't pay him before he helps you; or if you do, make sure it is deposited into an escrow account until the case is resolved. If you don't get results, you should not owe them for their attempt to help you! Do your research and be careful not to get taken. New laws are in place to shield homeowners, but scoundrels will always be there to steal your money if you let them.

When working with your servicer, you will have to turn in a loss mitigation package when seeking your debt modification. This will help them research your qualifications. At this point a professional will come in handy, since receiving a denial can be irreversible. It's imperative to hand them a package that is complete and can be approved the initially. It is likely you will need to provide proof of income, as you did when you applied for the original loan. Whether or not your income has fluctuated is one of the things that the lenders will be watching.

If the appraisal of your home has lowered and you are "upside down" in your debt, then you need to decide if holding onto your home is even the wisest thing. To restate the facts, you may qualify for a loan, mortgage modification with a principal reduction, but marketing the home may be a better choice. When you are upside down in your mortgage, a short sale can be a smart move. A short sale is when the home is sold for less than the payoff amount and the mortgage companyforgives the balance.

Short sales can be tricky though, because your servicer will move slowly to this solution and may pursue a deficiency judgment after the real estate sells. It's very important to get your short sale offer in writing and to make sure they waive their right to pursue this deficiency judgment at a later date. We never recommend homeowners attempting a short sale on their own. Professional short sale negotiators are available at no charge (to the homeowner), so take advantage and make sure your rights are protected.

When it is all said and done, it's important to know that you have options and letting your home go to sheriff's sale is never a wise choice. Your credit will be ruined for years to come and buying a new house will be virtually impossible until you have recovered. Don't be afraid to ask for help or seek a professional to aid you through these difficult circumstances. Your mortgage company uses professionals, you should have the same advantage!
To find out more about the foreclosure process in your state, visit Nick's website, which provides services to borrowers trying to save their homes before time runs out. Foreclosure refinance, deed in lieu, mortgage modification, and short sale assistance can be found, as well as information on stopping a foreclosure before the trustee sale. You can read more about how to prevent foreclosure while there is still time by visiting the site on the web here: http://www.foreclosurefish.net/