For those who are struggling to keep up with their home loan payments or who are already far behind home loan modifications can still be a great option, but they aren’t all equally beneficial.
So which type of mortgage modification is right for you?
As a homeowner who really, desperately wants to keep ahold of your home and can’t stand to see all of your efforts and investment wasted a home loan modification could be the answer. Plus if you qualify to have your rate or balance lowered why wouldn’t you take advantage of that?
However, there are clearly huge differences in different types of modification agreements with some truly great and others perhaps more dangerous than beneficial.
Unfortunately many homeowners have discovered to their dismay that the counseling programs and modification option the government has been pushing have often resulted in them ending up with higher payments or even winding up agreeing to borrow more money on already underwater homes to catch up delinquent payments. These are often not real modifications but recapitalization or repayment plans.
Even those borrowers who have had their interest rates and payments lowered are frequently defaulting. In fact some types of loans have seen re-default rates as high as 50%.
On the bright side principal reductions really seem to be working far better, with very few borrowers re-defaulting after receiving one. They haven’t always been easy to get but lenders are doing more of them with up to 40% of home loan modifications this year including principal reductions.
However, you only have one shot to get a loan mod, so while it is still critical to watch out for third party scams requesting upfront fees, it can certainly be smart to consult an independent expert or attorney to make sure you get a fair deal.
For those who don’t want to retain their homes, just want out of debt and desire a fresh start selling a home fast for cash is still possible even if underwater, by way of a short sale.
