Countless changes have been implemented to the loan modification process since it was put in force in 2007. The primary impetus behind these changes has been the eradication of fraud by so-called service providers who opened up storefronts to fleece homeowners who were distressed due to imminent foreclosure. Their ruse was to charge up-front fees, do no work, and then inform the homeowner that they just did not qualify. Never pay an up-front fee for a loan modification - it is illegal.
Loan modifications can be negotiated by these individuals:
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Real Estate Agent - These individuals should know the ins and outs of the loan modification process. Make sure the agent holds a current license. Some act as consultants solely to offer help, short sales, and foreclosures.
Foreclosure Consultant - Non-licensed professionals, these individuals can work for non-profit organizations as well a for-profit companies. You should check that they are registered with your state attorney general and ensure that they meet all state qualifications.
Attorney - You can do a web search or simply look in the phone book for a board-certified practicing attorney. You should be able to find a representative who specializes in foreclosures and loan modifications.
Homeowner - Having a professional can be a benefit, especially to a distressed homeowner facing foreclosure, but really nothing should dissuade you from going through the negotiation process yourself.
Learn how to spot loan modification fraud.
Protect yourself. Some situations to look for when you seek assistance include:
I'm With The Government - If a consultant poses as an affiliate of the government or a government program, such as HAMP or HAFA, you are probably dealing with someone misrepresenting reality. They will say they are directly linked to a certain program and require a fee to run your eligibility. They will use government-sounding names and government logos.
Pay Me - If a foreclosure consultant requires you to make monthly payments to the company rather than the lender while the loan modification negotiations proceed, you are probably dealing with a scamster.
Rescue Loans - If someone asks you to sign over the title to your house to a third party, promising that you will get a better modified loan with a lower balance, back off. You are going to end lose your house if you do.
Banks have certain requirements for loan modification.
You will not get a loan modification just because you want one. The specific goal is to get the loan changed in such a way that the home buyer pays no more than 31% of their current gross income.
Hardship - Most lenders want to seem some hardship to justify the loan modification. These can include divorce, unemployment, a forced job relocation, death of one who contributed to payment, or even a looming interest rate upswing.
Misrepresentation - Some home buyers only had to present a statement of income to obtain their original loan. Many misrepresented their earnings to land the loan. The banks will require absolute evidence of income. If your salary does not qualify, you will not get the modification.
Savings - Banks expect you to deplete any savings accounts into the present mortgage before considering it. They cannot ask you to liquidate certain retirement accounts - federal ERISA law protects.
Do not take loan modification lightly.
As with most financial affairs, loan modifications should be given plenty of thought, especially as to the possibility of success. Misrepresenting yourself in any way to try to qualify will only be a detriment, not only in landing the loan modification, but also should you later want to implement a short sale. Banks are also debt collectors, and as such, they will go after any information to do just that.
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