Avoid Foreclosure With Loan Modification

As more and more people fall into default and risk losing their homes, the government has come up with numerous ways to help them avoid foreclosure. Among the most popular approaches is loan modification, which basically involves changing the terms of one’s mortgage to make it more manageable. With a good loan modification program, you not only get to stay in your home—you also get your finances back on track. This article offers more reasons to call a loan modification lawyer and get started today.

Stay in your home
Obviously the biggest advantage of a loan modification is that you get to keep your home. You don’t have to worry about relocating, nor do you have to suffer the social stigma of a foreclosure. And since you don’t have to take out a new mortgage afterwards, you’re open to other financial options in the future. As soon as you’re back on your feet, you can start applying for new credit and improving your portfolio over time.

Choose your terms
There are several ways a loan modification can be done: lowering interest rates, forgiving part of the principal, cancelling late fees and penalties, or extending the life of the loan. With a good loan modification lawyer, you can negotiate with your lender for terms that really fit your needs, rather than just reduce losses on their part. To make sure you get the terms you need, set clear goals at the outset and take time to plan it out with your lawyer.

Get government support
The government is currently vamping up its efforts to avoid foreclosure, and this includes encouraging lenders to modify loans. Both prime and sub-prime mortgages, as well as second mortgages, are now eligible for loan modification assistance. Lenders are also given more incentive to help troubled borrowers avoid foreclosure. Ask your loan modification lawyer about government loan modifications and see how you can qualify.

Save your credit
Other loss mitigation options, such as short sales and forbearance, have a negative effect on your credit report. While they’re not as drastic as a foreclosure (which can last up to ten years), they still take a good amount of time to clear up, and that can further keep you from becoming stable. Loan modification leaves little to no signs on your credit, so you can start rebuilding your finances—or even take out new loans—as soon as it’s approved.

Prepare a Winning Loan Modification Application

Loan modification has no doubt won its place as the best way to avoid foreclosure and get one’s mortgage back on track. But the fact is that not every loan modification application gets approved, and even completing the paperwork may not be enough to qualify. At the end of the day, it’s a question of whether or not a loan modification will make financial sense to the lender, rather than what’s best for you.

But that doesn’t mean your loan modification application is out of your hands. Below are some steps you can take to ensure a successful application with your bank.

Start early.
Before the program was popularized, borrowers typically had to be at least 90 days in default to apply for a loan modification. However, with new government policies, anyone can now submit a loan modification application, even if their mortgage is current. As soon as you start having difficulty making ends meet, call up your lender and ask about your options. That way, you can start finding solutions before it gets too complicated.

Do your research.
Most loans today are either owned by one lender or converted into mortgage-backed securities, which are basically “pieces” of the mortgage distributed between several investors. Mortgages that fall under the latter are harder to modify because there are more parties concerned, each of which has to approve the loan modification application. Find out who owns your mortgage by calling your bank or looking it up on government websites.

Write a convincing letter.
The hardship letter is one of the main requirements in a loan modification application. It’s where you explain to your lender how you fell behind and convince them that you can stay current once the loan is modified. Make sure to keep everything factual—you can appeal to emotion by drawing attention to certain details, but you can’t exaggerate or twist the facts. Most importantly, keep it brief but detailed—too short and you can’t really explain much; too long and the agent won’t even want to read it.

Work with the pros.
If you’re not sure you can do it yourself, consider hiring a loan modification attorney. He or she can help you make quicker contact with the lender, prepare your loan modification application, and give you advice on staying on track once your loan is modified. It may cost more at the outset, but the assurance and convenience it offers can be well worth your money.

Getting a First Horizon Loan Modification

First Horizon is one of the most established financial servicers in the United States, having been established in 1834 and playing a big role in the recent sub-prime mortgage boom. Today, it is also among the most active providers of loan modification, a process that allows struggling homeowners to get more comfortable mortgage terms. If you're looking to get a First Horizon loan modification, read on for a simple borrower's guide.

Qualifications
As with any other lender, the main requirement for a First Horizon loan modification is a valid hardship that justifies the borrower's falling behind. A borrower may apply for loan modification without being in default, as long as he or she can prove difficulty in meeting monthly payments. Adjustable-rate or high-rate mortgages are good candidates for loan modification. Other parameters include:

-a stable income
-ability to afford the reduced rates
-clear bankruptcy record (i.e. the home should not be in bankruptcy)

Hardship letter
One of the first things the lender will require is a hardship letter, wherein you explain the nature of your hardship and justify your loan modification request. Valid reasons include medical emergencies, job loss or income loss, divorce, or a death in the family. Make sure to keep your letter factual and simple--agents go through thousands of letters a day and lengthy texts are likely to be pushed to the back.

When should one apply?
The simple answer is as soon as possible. Most people who need loan modification are already in danger of foreclosure, so time is of the essence. As soon as you miss a payment or foresee financial difficulty, you can call up the bank and start comparing your options. Remember, thousands of other borrowers are seeking a First Horizon loan modification, so the earlier you get started, the faster you can get back on track.

How are loans modified?
A First Horizon loan modification can come in any of several forms, depending on what makes the most financial sense. The most common types are:

-reduction of interest rate;
-change from an adjustable-rate to a 30-year fixed-rate mortgage;
-extension of loan terms;
-distributing late payments and penalties to monthly payments; and
-direct reduction on the principal (usually offered on homes with negative equity).

If the borrower doesn't qualify for loan modification, he or she can also look into other solutions that can minimize the damage or avoid foreclosure. One of the most common alternatives is a short sale, where the home is sold for less than the value owed and the proceeds paid to the bank as full payment. Consider working with a loan modification attorney to increase your chances of approval and learn more about your loss mitigation options.

Loan Modification Options for California Homeowners

Millions of homeowners have applied for and gotten loan modifications in the past year, mostly as a result of the Obama administration's loan modification program. But efficient as it is, few homeowners are aware that loan modification takes on many forms--and that each one suits a different kind of borrower. If you're working with a loan modification attorney California firm, it helps to know at least some of your options. Below are some of the most common forms of loan modification and how they can help you.

Interest rate reduction: This is the most common solution and often the primary approach of a loan modification attorney California. As the name implies, the lender simply cuts down your interest rate. To give you an idea of what it does, cutting the rate from 6% to 3% on a 30-year fixed-rate mortgage can reduce monthly payments by about 30%.

Loan term extension: A lender may also decide to extend the loan term rather than reduce the interest rate. They are generally more expensive for the lender and are thus given only in special cases, often when a sub-prime adjustable-rate mortgage reverts to the regular rate. Extending a 30-year mortgage to 40 years cuts down monthly costs by about 8%.

Financing of arrears: If a borrower has accumulated a large amount of late fees, the lender may decide to add them to the loan balance instead of charge them up front. This will make the payments temporarily higher, so it usually doesn't work for most borrowers. However, this is often a bank's first offer because it costs them less than most types.

Interest rate freeze: This plan is generally designed for people who have adjustable-rate mortgages where the introductory period is nearing its end. Before the interest rate jumps to twice the current rate or more, the lender "freezes" it so that it stays affordable. This costs more for the bank, however, so it takes a good deal of negotiation to get approved.

Principal reduction: Under this plan, the lender simply forgives part of the amount owed on the home. This generally makes the most savings for the borrower, but constitutes the biggest loss for the lender. To get a principal reduction, one may need a loan modification attorney California with specific experience to justify his cause.

Remember, not every plan works for every borrower, and sometimes one is simply better off with a different solution. To help you better understand your options, find a competent California Loan Modification Attorney and start working on your loan modification today.