Loan modification:
What is a loan modification? A loan modification is when the bank takes your loan and gives you new terms. So if you had a loan with 8% interest for instance, the bank may do a loan modification and make your new rate 5.5% and roll the past due amount on to the end of the loan. Why would a bank do a loan modification? Banks do loan modifications to avoid foreclosure. It is better for the banks to keep something less but positive on their books, then it is to lose a house to foreclosure.
There are a couple of ways to go about getting a loan modification, one is to talk to your bank which is a great first step. If the bank is reluctant to help, you can seek help from loan modification companies. The bank will likely want to see at least one payment to do a loan modification as a gesture of good faith. The loan modification companies will ask between $2000.00 to $3000.00 to do this. Be careful to gather a good amount of information, as some loan modification companies are willing to promise you the world for a price yet give you no promises. You should only be paying if they can perform on what they say they will do.
The loan modification process can take anywhere from 30-90 days so the sooner you ask for a modification the better off you are. The bank and loan modification companies will generally ask for a hardship package and a hardship letter. This is a requirement from the investors that have the note when doing a loan modification. Essentionally they are asking for everything that you would need as if you were applying for a loan.
When doing a loan modification, the bank will need to make sure that you can afford the new terms, which is why they ask for all the information. You may not think you can qualify for a loan, but they are trying to find a number that works for everyone. Loan modifications are becoming a survival tool for both banks and homeowner.
