For those worried about foreclosures, time is your enemy.  Many borrowers are facing foreclosures because their “interest only” or “variable rate” loan interest terms have caused their monthly mortgage payment to skyrocket beyond what they could afford.  For those in Auburn facing foreclosure because of your loan problems, you are not alone. According to the New York Times, about 1 in 11 mortgage holders face loan problems, which often lead to a foreclosed home. Loan modification allows homeowners and lenders to change the terms of a loan in order to stop foreclosures.  A loan modification is NOT a new loan.  It is often the ONLY option for some homeowners with bad credit that are behind on their mortgage who are striving to avoid foreclosure.

Here is how it works:  The owner of the home contacts their lender and lets the lender know that they are having trouble with the current mortgage payment.  Often the lender will want evidence of their income and reasons why they are having trouble with their home mortgage.  It is a renegotiation process, and loan restructuring of an existing mortgage note.  There should be no loan fees involved, since it is not a refinance nor is it a new loan. A loan modification can be done in several ways or a combination of ways such as:

• The loan’s interest rate may be reduced.
• The interest rate could be changed from an adjustable to a fixed rate.
• The period of time the borrower has to pay the loan back can be lengthened.
• The type of loan could be changed altogether.

If you are a homeowner in Auburn facing a foreclosure, remember it is always homeowner’s best interest to avoid foreclosure and try to keep their home, and it is also in the lender’s best interest to help the homeowner as well.  Lenders do not prefer to take a foreclosed home since it is a hassle for them and also a money-losing situation most of the time.  This loan modification process is a solution that turns a bad situation into a win-win situation for both parties.

Posted on Tuesday, November 18th, 2008 at 6:39 pm and is filed under Foreclosures. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.