Loan Modifications Prevent Foreclosures

When the foreclosure crisis began to be a serious threat to the housing market, one of the first steps taken by the federal government was to ask mortgage industry executives to do voluntary loan modifications whenever possible. However, because no laws mandating loan modifications were passed, most lenders ignored the federal government's requests and were non-responsive to loan modification proposals.

Scores of borrowers who were previously considered lower risks are now threatened with foreclosure, as the credit crisis spreads across the prime mortgage sector. And, home values continued to plummet, as more and more homes were lost to foreclosure, adding to the already swollen inventory of homes on the market. As a result, foreclosure has now become an even more expensive option for lenders.

The Federal Deposit Insurance Corporation (FDIC) is offering delinquent IndyMac borrowers significant concessions on their past due mortgages--lowering interest rates to as low as 3%, extending terms to as long as 40 years, waiving traditional loan modification fees, and holding payments under 38% of borrower's gross income.

The purpose of this was not to give these particular people a great deal, but instead to set an example to other lenders. In a recent statement by FDIC Chairman Sheila C. Bair she advocates "a systematic and streamlined approach to loan modifications to put borrowers into long-term, sustainable mortgages." The hope, according to FDIC officials is that this program will be come an industry model.

A loan modification, also known as a mortgage restructure or modified refinance, is a negotiation between the borrower and lender to modify the terms of the mortgage so the payment becomes more affordable for the borrower. It is not a refinance, but merely a restructuring of the loan terms, so the borrower is able to stay in the loan instead of losing their house to foreclosure.

Can I do a loan modification myself?
"You can certainly try to do a loan modification on your own and not use a professional service," but Michael Geffre of Entrust a San Diego loan modification company with over 9 years experience, "80% of these attempts fail." If you don't want to be among the 80% that fail, it's a good idea to make the investment of retaining an expert to represent you in the loan modification negotiation.

Most experts suggests that if you are having trouble making your mortgage payment or facing a significant interest rate or payment adjustment to search out a loan modification expert as soon as you are served a Notification of Default.

"Although we can help most people right up until 10 days prior to a foreclosure sales," says Geffre, "there is a complex set of procedures, negotiations, and documentation that needs to be completed. In some states this process needs to be performed by an attorney or properly licensed counselor."

Loan modifications are looking more and more attractive to lenders.
The federal government has already taken the lead in trying to get lenders to accept loan modifications. In addition to setting the example with the Indy Mac loan modifications, the federal government put together HopeNow.com, an alliance between counselors, servicers, investors and other mortgage market participants. New federal legislation has also been passed to assist homeowners: FHASecure, which is still in effect until December 31, 2008 and the new HOPE for Homeowners, which became effective on October 1, 2008 and remains effective until September 30, 2011.

State governments are following the lead by passing stricter foreclosure laws and laws that promote loan modifications, like the new California law (Civil Code 2923.6) which states that servicing agents for loan pools owe a duty to all parties in the pool so that a workout or modification is in the best interests of the parties if the loan is in default or default is reasonably foreseeable, and the recovery on the workout exceeds the anticipated recovery through a California foreclosure based on the current value of the property.

With increasing pressure from federal and state governments and declining home values, lenders are finding loan modifications a more attractive option. Are you facing foreclosure? Do you need a loan modification? Now is the time to take decisive action. Please complete this short form below and one of our foreclosure prevention specialists will contact you shortly to discuss your housing needs.

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This website does not promote loan modification scams of any kind. We do not offer mortgage relief or home foreclosure assistance. Many states do not allow law firms or loan modification companies to take money up-front. Check with your state's Attorney General for more specific updated information.