There seems to be very few people that have not been touched by the economic downturn of the United States economy. The unemployment rate has reached its highest point in decades, leaving many families wondering how they will make their next mortgage payment.
There is plenty of news coverage about how to receive help if a person is in foreclosure but what about those that are heading towards default? Does a person have to wait until they start missing payments to get help? The simple answer is no. The answer may be an equity loan modification.
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First, what is equity loan modification? This is a renegotiation between the lender and the borrower when there is little or no equity in a home. A person can simply refinance when they have a large portion of their principal paid off but this is not the case for most people whose home values have dropped over the past year or two. It may be possible for a person to renegotiate a lower payment through a better interest rate, a longer loan period or even a reduction in the principal. These factors may help a person that is struggling to make their payment.
A person does not have to wait until they are in default to apply for an equity loan modification. Instead, the lender can be notified at any point that the homeowner is heading toward default. A lender would actually prefer that a person does not wait until they can no longer make the payment. This ensures that the lender will still continue receiving a payment as they renegotiate the loan. It may also make the lender more willing to consider a modification of the loan. A homeowner who is trying to correct a situation before it escalates appears more responsible and less of a risk for defaulting on the renegotiation.
There are many different circumstances that a lender considers legitimate reason for a homeowner to be heading towards default. This may include circumstances such as the loss of a job by the primary income earner or a hospital stay that includes enormous medical bills. A lender may consider these situations to only be extenuating circumstances that will eventually be overcome by the homeowner. Lenders are not just throwing around money at whomever is having a difficult time making their payment. Instead, they are offering equity loan modification to individuals that still appear to be a credible risk.
In an effort to stimulate the housing market, the federal government has allocated $75 billion to promote the equity loan modification process. This is an incentive that benefits both the lender and the borrower. Lenders receive a bonus for every loan modification that they process and the borrower receives monetary help for making timely payments to the lender.
Renegotiating a loan can be a very difficult process for a homeowner to take on by themselves. A person facing default would be wise to enlist the services of a company that already deals with this type of loan modification. These companies are equipped to handle the negotiations with a lender and are capable of negotiating a better deal than the homeowner. It will also help give the homeowner some peace of mind knowing that there is someone fighting on his side.
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