If you're having trouble with your mortgage, you've probably heard about loan modifications. Modifying a mortgage loan involves making a permanent change to one or more of its terms. The interest rate can be lowered, the term can be extended, and principal and fees can be reduced.
The end result of a modified mortgage is that the homeowner avoids foreclosure and stays in their home, their loan is reinstated and returned to normal servicing, and the monthly payment may be lower than it was before. Unlike refinancing, there are no closing costs or application fees, and no credit check required to modify a loan.
It's a great option for distressed homeowners, and probably their only hope for keeping their home. You probably already knew all of that. But you may not have known that there's never been a better time to get a loan modification than right now. Here's why:
Interest Rates Are Historically Low
Mortgage interest rates are less than 4% for many loans loans. The cost of borrowing money for housing has hardly ever been lower in history, and when they were lower, it was only by a fraction of a percentage point. You will probably never get a lower interest rate than you will today.
Borrowers who get a loan modification sometimes get an interest rate that's even lower than the historically-low market rate. Some get a rate of 2% for a portion or the duration of their modification.
Rates been kept low by the Federal Reserve Bank to stimulate the economy and encourage full employment in the aftermath of the Great Recession. As the economy continues to improve, interest rates will continue to go up. So, if you need to modify your loan or refinance, it makes sense to lock in today's low rates for decades to come.
HAMP Is Expiring
The federal government's Home Affordable Modification Program (HAMP) is expiring December 31, 2016. Through HAMP mortgage servicers are paid incentives to modify loans rather than foreclose. You could still get a modification from your bank (in house) in 2017 and beyond, which may be just as good, but it's good to have the option of HAMP available.
There may be no other way for distressed homeowners to save their home than through a loan modification. Unless you have the cash to reinstate your mortgage, you don't have many choices outside of a loan modification to save your home after you've fallen behind on your payments.
There is one negative to getting a loan modification, and it's a big one. It's that most homeowners who apply on their own are denied. The benefits of a modification are irrelevant if you can't get approved for one!
The solution is to not go it alone. Working with an experienced professional, such as an attorney who focuses their practice on foreclosure defense and loan modification assistance, can increase your odds of getting approved for a loan modification. Someone who deals with loan mod issues day in and day out knows what to do to maximize an applicant's odds of success.
The other benefit of hiring an attorney is that they can defend you from foreclosure while a permanent resolution is pursued. Banks have been known to use fraudulent documents to illegally kick people out of their homes. An experienced attorney can spot that, and other issues, and use it to prevent foreclosure.
If you're behind on your mortgage, or anticipate that you will have a problem making payments in the future, consider trying for a loan modification and working with an attorney to achieve it. A loan modification great, and there really is no time like the present to get one, but isn't going to happen unless you take the right actions to make it happen.