Loan Modification: Savior for the Struggling Homeowner or Just Another Scam?

It seems like every day we hear some new story about homes being foreclosed on or homeowners simply, feeling hopeless and in desperation to start over, walking away from their house and giving up on their mortgage. But for every person who walks away, there are countless others who fight with every fiber of their being to keep what they worked so hard to get in the first place. For those willing to fight, is loan modification a viable tool in the fight to save one’s home?

While there are a few voices out there in the world decrying loan modification as the latest in a long line of real estate and mortgage related scams, much of their opinion comes as the result of misinformation and a misunderstanding of what, exactly, a loan modification is.

The truth is once you understand the process it’s easy to see that it’s anything but a scam, but rather a method to help both the homeowner keep their home while at the same time preventing the bank or other lending institution from losing money or, at least, more money than they would otherwise. A scam results in one party benefitting while the other does not. With loan modification, both parties benefit.

How Does the Homeowner Benefit?

A loan modification may result in any one, all of, or a combination of the following potential benefits:

– A lower interest rate
– Forgiveness of late fees and penalties
– Extension of the loan term
– Reduction of the principal balance
– Rolling up of delinquent payments into the principal

Forgiveness of fees and the rolling up of delinquent payments will bring instant relief while the other benefits will bring long-term relief by lowering your monthly payment.

How Does the Bank Benefit?

The biggest benefit to the bank is that they continue to receive payments from the homeowner. Going through foreclosure and attempting to resell a home can be costly ventures and might even result in a major loss if a home sells for less than desired.

Rather than take the risk, many banks are willing to negotiate a loan modification.

Who Do I Talk To About Doing a Loan Modification?

The answer to this question may seem simple. Wouldn’t you simply talk to your bank? It’s true that you could try working directly with your bank, but by doing so you are giving up negotiating position that is likely to result in your getting the short end of the stick.

Talk to a reputable loan modification company. There are many legalities involved that you might not understand, resulting in missed opportunities. Let a professional guide you through the process to ensure that you get the best deal.