There are a few ways to save your home from foreclosure, one option is a loan modification. Once you understand the loan modification process, it will be easier to assess if this program is right for you.
Lets look at navigating the modification process:
Behind in Payments
When you are 3 months or more behind in mortgage payments you need to consider a loan modification. It's easier to negotiate loan terms before your home goes into foreclosure. On the other hand, banks won't talk about modifying your loan until you're behind in your mortgage payments.
Hiring a Lawyer
Since the loan modification process can be complicated, hiring a lawyer is essential. Choosing a lawyer who specializes in loan modifications is also important. A lawyer will analyze your financial situation and lay out a plan of action. Once you and your lawyer are in agreement, they will proceed in talking to the bank. A lawyer who is skilled in negotiating the loan modification process is worth the fees.
The bar association has a referral list of qualified attorneys.
What Hardships Qualify for a Modification?
Lenders want to know why you are having trouble making payments.
Lenders will accept the following reasons: Job loss, divorce, illnesses, a rise in interest rates, unexpected financial emergencies. These are not inclusive, but most common.
Modification Time Line
Once your lawyer submits the paperwork to the bank, it can take 2 weeks up to several months. The reason the time line is so long is because the loan modification process is overloaded. Banks and lenders were not prepared for such a large magnitude of financial hardships.
Areas for Negotiation
There are three areas that can be modified, they are: Interest, principal and term (length of loan). All of these an impact on payments, your lawyer will have to use their negotiating skills to find out where your lender will give the most ground on.
The end result of this is affordable payments. Payments that allow you to keep your home and bring the mortgage up to date. Your lawyer has that "magic" number when he did your financial analysis. His mission is getting your loan modified to meet that magic number.
The better case is if your lawyer can actually get a payment negotiated lower than what you expected.
There is always hope to save your home, even up until the day foreclosure. Granted, the odds are much lower at this point, this is why taking action sooner than later is the better choice.