Loan Modification Companies: Necessary or Not?
Sometimes people experience financial difficulties that result in them defaulting on their mortgages. Before a lender begins foreclosure proceedings, it might behoove these folks to visit a loan modification company. The following will look into how these companies work and if they can help troubled homeowners.
The purpose of loan modification companies is to act as a go-between for borrowers and lenders when a borrower cannot make his mortgage payment. Often, these businesses work on behalf of the borrower to request a lower payment so the homeowner can retain ownership of his home, rather than having to give it up to the lien holder through foreclosure. One of the ways to lower a mortgage payment is by reducing the loan’s interest rate. Another is to extend the term of the loan to allow more time to repay it. A third is by lowering the principal of the loan. All of these make it more affordable for a homeowner to make his monthly mortgage payment, enabling him to keep his home. Loan modification businesses are also known as debt consolidation companies or debt settlement companies. Whatever they’re called, they are often the only thing that stands between a person losing his home or keeping it.
A loan modification company can be hired by either the homeowner or a lender. When working for the homeowner, a company assesses the mortgage payment the borrower can handle by going over work stubs, tax returns, and investment earnings. Then it contacts the lender and suggests the amount. The lender then decides if that amount is enough. If it satisfies the needs of both lender and borrower, they’re in business. The homeowner is then sent a bill for services rendered. These companies, when working on behalf of the lender, attempt to salvage loans that are in trouble, saving the lender the expense of filing for foreclosure.
There are different types of loan modification, with which loan modification companies are quite familiar. A basic modification entails a total overhaul of the original mortgage loan. Extension of terms, lower interest rate, and decreased principal all contribute to making a homeowner’s life a bit easier. Mortgage loan forbearance, on the other hand, allows a temporary modification or suspension of the payments enabling the borrower to ride out a spate of financial difficulty. Some types of federal loan modification also aim to help homeowners who have recently lost their jobs by allowing a hiatus of sorts on making mortgage payments for up to 12 months so he can search for work.
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