Mortgage Modification: Pitfalls to Watch Out for

Mortgage modification is among the biggest industries to have sprung up from the real estate crash. With government backing and widespread participation from lenders, it has become the solution of choice of many homeowners looking to save their homes. But just like any financial offer, mortgage modifications have their share of weak spots. And when it’s your home at stake, you’ll want to put a bit more effort into your choices and make sure you play it safe. Here are some of the most common weak spots of loan modification and how they can be avoided.

You can only try once. Borrowers who get denied a mortgage modification cannot file a second application. However, surprisingly few borrowers know this, and send off their application kits with missing documents or poorly drafted letters. For a major investment like real estate, the last thing you want is to take chances.  

Plan your first attempt carefully—work with experienced professionals and don’t hesitate to invest in good service. And once you get your mortgage modification, make sure to go over all the rules. Sometimes, an attractive offer may actually include hidden costs that don’t really help, and may even push you further into debt.

Lenders don’t have anything to gain. While the program offers incentives to lenders who facilitate loan modifications, sometimes it still makes more financial sense for them to foreclose or agree on a short sale. After all, if you’ve been behind on your payments, they don’t want to risk losing more by keeping you on board. That’s why the requirements are tight and the rules for staying on the program are stricter than in regular loans. A good mortgage modification attorney can help you negotiate more efficiently. Look for ways to convince your lender that modifying your loan makes more sense than foreclosing.

There’s a high rate of fraud.
Mortgage modification companies have turned up by the thousands as the housing crisis tightened its grip on homeowners. But with this fast spread comes a real risk: thousands of homeowners have been tricked into paying companies that don’t really do anything to help. While the government has put in steps to prevent mortgage modification fraud, the best thing to do is still to choose wisely. Upfront payments are the first sign of a loan modification fraud - if someone asks you to pay before doing anything to help you, turn your back immediately and look for another company.