Is a Loan Modification a Good Idea?
Do Loan Modifications Really Work and Are They a good idea?
In recent years, loan modifications have had frequent coverage in the newspapers, television, and even commercials as an alternative to foreclosure. You’ve likely heard loan modifications touted as the solution for financially distressed homeowners. However, for those who have the inside track in the mortgage industry, this is the most likely scenario you’ll hear about:
A man, let’s hypothetically call him Jack, is having difficulty making mortgage payments on his underwater home. He hears about loan modifications, and hears the promises of reduced mortgage interest rates, principal reduction, or a longer amortization period, all promised solutions to his financial troubles. He starts to contact his lender for assistance. Rather than getting a helpful voice on the other line offering numerous options for home loan modification as he expected, he gets redirected to various departments and gets vague, inconclusive answers. When Jack finally gets through to someone in charge, he’s told that they cannot offer him a home loan modification.
One day, Jack sees an ad while he’s visiting a finance website, trying to figure out how he can avoid foreclosure. The ad is a private company offering home loan modification. Still a little dejected, Jack gives them a call but he’s not expecting too much. To Jack’s surprise, they inform him that they have a special connection with his lender and that they can push his home loan modification request through the proper channels, getting him a significant reduction on his mortgage principle. However, for them to work on Jack’s mortgage, it would take a $3500 up-front payment. He checks out the company with the Better Business Bureau and doesn’t find any official complaints. The agent he’s speaking to sounds very knowledgeable and competent, and he has seen the company’s name everywhere. Still cautiously optimistic, Jack remembers having read advice telling him to never pay money up front for home loan modification. He asks the agent on the other line about this, and the agent replies: “Has anything else you’ve read worked out for you so far?” Feeling desperate and out of options, Jack writes a check for $3500 to the loan modification company.
Loan Modification Scams
Not all home loan modification programs are scams. There are legitimate non-profit foreclosure avoidance counselors and agencies that are not trying to part you with your money. But virtually any for-profit home loan modification program or loan Modification Company advertised on the radio, television, or the internet seeking payment up-front is a scam. These home loan modification programs will often have names that make them sound official, e.g. “National Home Loans Modification Company”. Stay away from any loan modification companies that request payment up front.
Banks Do Not Like To Offer Mortgage Loan Modification
If you’re lucky enough to avoid the many home loan modification scams out there, there are still a couple major problems with loan modification. First of all, banks in general are not in the business of offering loan modification, especially interest reduction or principle reduction, which is often advertised by 3rd party loan modification services. In theory, it would make sense for lenders to write down mortgages for individuals who are having difficulty paying. After all, it saves the lender from the expensive process of foreclosure. In reality however, lenders simply cannot start writing down loan balances without having everyone demanding the same type of treatment and causing a major crisis for lenders and investors across the nation. In reality, most homeowners will find that their lender is less than willing to discuss loan modification with them.
Loan Modification Is Not a Long Term Solution
At the end of the day, loan modification is not a long term solution for a distressed homeowner. Since it is virtually impossible to have your mortgage principle reduced – despite what the many loan modification scams would have you believe – the legitimate loan modification solutions out there only prolong the inevitable. Rather than allowing you to cut your losses and seek a fresh start, loan modification offers the allure of holding onto your home, tempting you to keep making payments even in a dismal financial situation. But with significantly reduced income and/or a mortgage that is worth significantly more than your home, loan modification solutions fail to address the root of the problem. In fact, loan modifications can severely hurt distressed homeowners by encouraging them to keep making payments they simply cannot afford, in a situation that is inevitably headed towards foreclosure. Unless loan modifications can increase your income or improve the housing market, loan modifications ultimately do not work as a long term solution for distressed homeowners.
Alternatives to Loan Modification
Just because loan modification doesn’t deliver on its promises, doesn’t mean that your only alternative is 
foreclosure. There is an alternative to foreclosure that offers you a fresh start. By choosing to perform a short sale, you can avoid the public spectacle of foreclosure, salvage your credit rating, stop making home mortgage payments you can’t afford, and you can even qualify to purchase a home again within 2 years. For those who are unaware, a short sale is when you, the homeowner, sell your underwater home – with an agreement from the bank to release their lien on the home. With a good Maryland short sale Realtor, you can also in many cases negotiate complete debt forgiveness, leaving you with a clean slate and a fresh start. A short sale allows you to avoid the blemish of a foreclosure on your record, as well as the psychological stress and anxiety associated with the painful foreclosure process.
Perhaps best of all is that a short sale doesn’t have to cost you anything, as most lenders will cover the cost of the short sale. To learn more about short sales, contact an experienced short sale Realtor today and find out why a short sale is the best alternative to foreclosure for the distressed homeowner. Getting in tough with us will be a great start to your short sale. Our highly motivated and extremely experienced short sale specialist Realtors are dedicated individuals who want to see you continuing your life the way you always planned it to be.
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877-737-4903
Ask a local short sale specialist!
Is your home facing foreclosure? Are you looking for options? Our stop Maryland foreclosure specialists provide FREE short sale expert services to Baltimore homeowners in hardship. Contact us right now and see if you qualify for a short sale! Need a Baltimore Distressed Property Expert in short sales to offer free broker short sale services? Our Baltimore MD area Distressed Property Expert real estate agents are here to help, and are Certified or trained in the Maryland Home Affordable Foreclosure Alternatives, or HAFA Government short sale program.
Copyright First Coast Realty Associates 2011
Do Loan Modifications Work 2011
Is A Loan Modification A Good Idea 2011
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