Topic: Loan Modification
Troubled times for home loan debtors
These are troubled times as far as homeowners and their debts are concerned. Good for the banks and lending institutes, because many debtors are defaulting, resulting into a resale of their homes, which in turn fetch a decent profit for banks. Bad for debtors since they end up losing their most prized possession – their home. Loan modification facilities can offer an alternative for the debtors to “save” their situation and still pay off their dues – simultaneously. There are options available for individuals who owe money in the form of debts to banks, and who don’t have enough funds to redeem their dues.
Loan modification process
Unlike home mortgage refinancing Loan modification process is aggregating all your existing loans into a single major loan having it’s own terms and conditions and a monthly pay off schedule. The major advantage of a loan modification process is that you end up dealing with one loan rather than keep track of several loans. You also have one monthly payment plan to redeem your loan, so it’s easier to take care of paying your outstanding loan dues. And it’s also easier to pay your monthly dues – you can select your monthly plan or have one drafted out that caters to your monthly cash inflow or income. The advantages are many.
- Reduced interest rates, which is always lower than refinance mortgage rate so you pay less to redeem your loan
- Reduction in the monthly payment while paying your dues
- Consumer gets the option to pay off the total dues earlier and become debt free sooner.
- Stop “collection” calls from creditors
- Live a hassle-free life
Knowing the advantages of a particular process leads to the next obvious question – what’s the process involved? It’s easier to understand the exact working and the following points explain it:
- The borrower contacts the creditor to find out whether he or she qualifies for a mortgage loan modification program, or not.
- If the borrower is eligible, the creditor reduces the interest rate on the borrower’s mortgage. Doing so reduces the borrower’s monthly payments by as much as 38 percent of his or her income.
- The lender then further cuts the interest rate so the monthly payments decrease to only 31 percent of the borrower’s income. The cost of this secondary rate reduction is shared between the creditor and the federal government.
- The creditor may also lower the borrower’s monthly payments by reducing the total amount owed, and extend the loan term so as to “restructuring” the existing loan conditions. This ensures the net interest amount charged on the principal loan amount is drastically reduced.
- The government may reward borrowers with an additional $1,000 per year in terms of “benefits” if they keep up their payments after their loan is modified.
Availing loan modification
Loan modification facilities are made available by mortgage brokers and banks, as the primary loan modification credit lenders. However, private companies and firms also deal with home loan modification facilities. The net is the best place to find such lenders, since all major creditors have their own portals – and those who don’t should be well avoided since they might not be “up to the mark” – a web site presence is most essential for all business since it provides “legitimacy” to their financial existence. The other options include going through news papers and financial periodicals where many loan modification companies advertise themselves.