Loan Modifications - Is It Really Working For Those Who Need It?

If you qualify for loan modifcation, you may be able to refinance the debt and/or extend the time period over which you pay back the past due amount to be as long as the remaining term of the loan. You may qualify for this if you no longer have the financial problem and can afford the new payment amount. This option should be the first you seek if your intent is to still live in and pay for the home. But beware, not too many loan modifications are working for struggling homeowners who need foreclosure prevention. And in many cases, the loan modifications backfire on homeowners they are meant to help. Here’s why:

· More than 50% of these loans are packaged with increased payments.
· Fewer than one in ten of the current loan modifications result in a reduced principal loan balance.
· During the housing boom many borrowers were sold on the benefits of a second mortgage in order to avoid paying mortgage insurance. Not many first lien mortgage holders are willing to help borrowers with payments on second mortgages. Similarly, the second mortgage holders would rather not waive their rights in a loan modification situation that could result in a 100 percent loss. They'd rather try collecting a few more payments before the borrower goes into foreclosure.
· Overwhelmed loan servicers are set up for an automated foreclosure process that has built-in financial incentives. They are not set up for the case-by-case negotiation process necessary for modifications.
· Many loan servicing companies are set up to receive monetary incentives to foreclose – rather than modify – your loan.
· Many of the loans that were purchased by private investors and not the secondary market can’t be found and brought into the process because the loans have been divided so many times, which means they would all have to agree to the modification.

As of this writing loan modification is not truly working for all those who need it. Instead we are seeing fraud from a largely unregulated industry of private loan modification service companies popping up to take advantage of those in need of real help. They are apparent when they charge thousands of dollars in upfront fees. We ask to you continue to check our blog on our website at http://www.MakeNoMistakes.com/ and click on loan modification to keep updated. It is our goal to always have information available that is current and helpful.