Your Home: Fighting to Keep What’s Worth Fighting For With a Loan Modification
History of loan modifications in recent years
The recent and continuing loss of homes in the United States due to economic difficulties is perhaps the greatest tragedy associated with the current financial crisis. The collapse in home values has made it extremely difficult for millions of Americans to keep their homes because they cannot refinance their mortgage or sell their homes if they cannot afford their current mortgage payments. In other words, lower home values mean that home sales and refinancing become increasingly difficult to pull off.
That said, many homeowners have decided to short-sell their homes rather than keep their homes because they don’t have to maintain a home with negative equity or because they didn’t change the terms of their mortgage. Retiring makes more financial sense when and if the negative equity is too large, and the owners’ goal is not long enough to even guarantee a break-even point in the near future. At the same time, others have refused to lose their homes and have vowed to take whatever steps are necessary to ensure they don’t have to.
For those who intend to keep their homes, loan modification programs have become one of the main means of doing so. These programs aim to create more affordable mortgage payments, but it can often be difficult to qualify for these programs due to an incredibly complicated application process.
How banks handle loan modifications
Banks often make the application process very complex. Either the banks don’t have the right infrastructure, or they’re spinning people around on purpose.
Mistakes to avoid when applying for a loan modification
The other problem is that many people apply to restructure their loan without a proper understanding of what the process entails and what will be required of them. This can delay a positive response to a request for many months, or even make it impossible for many people to receive it. The reality is that those who are not pre-qualified will not receive the approval they expect. Here are almost two critical criteria for qualification:
- The homeowner must demonstrate to investors and lenders that modifying their existing loan is more profitable than foreclosure. To help with this, the FDIC has implemented a net present value (NPV) analysis of a loan modification.
- They also need to demonstrate their ability to make their new mortgage payments. Plain English: If the borrower can’t make the new reduced mortgage payment, he won’t get the modification.
Therefore, having an advanced understanding of whether or not you qualify for loan modification is key. For those who are not pre-qualified, taking responsible steps to adjust their budgets could improve their chances of being approved, since that is their goal. The more informed a consumer is, the more empowered they are to make the right decision.
If you are considering applying for a loan modification, it is important that you evaluate and receive guidance on the ratios that are critical in analyzing your loan for modification. These ratios include pre-modification and post-modification ratios.
Instead of trying to do this on your own, which certainly requires some solid math skills, it’s best to seek out self-help that provides an easy solution, unbiased analysis, and no conflicts when evaluating your loan for a modification.
Caal loan modification software is designed to simplify the process and increase the chances of success and approval.
