Loan Modification

It's important to know that ALL banks are not created equal and rules can differ from bank to bank.  Please call one of our housing advocates to discuss what your options are with your specific bank or servicer.​​

Does applying for a loan modification stop foreclosure?

A loan modification can stop the foreclosure process as close to a few days before the sale date.  Your lender is then required to suspend the foreclosure process until a formal decision is made. This buys your foreclosure defense advocates some time to work out a lasting solution with your lender.

Pro's of a Loan Modification (If Applicable by the Bank)

  1. Avoid mortgage foreclosure - A loan modification helps to reduce house payments. Lower repayments could help prevent a short sale or mortgage foreclosure.

  2. Less interest - Interest payments could be reduced. Homeowners will also be able to switch from a repayment to an interest-only mortgage to help with affordability.

  3. Clear some of the balance - A lender may be prepared to write-off a small percentage of the outstanding mortgage should negative equity be an issue.

  4. Lower house payments - Extending the term, reducing interest rates, switching loan type or reducing the outstanding mortgage balance will help reduce house payments.

  5. Peace-of-mind - As HA discusses financial difficulties with your lender’s loss mitigation department and reaching an amicable solution this helps to alleviate much of the strain a homeowner is under.

Con's of a Loan Modification

  1. Proof that money problems exist - It is necessary to prove that financial difficulties mean that house payments are no longer affordable to the homeowner.

  2. Negative equity - Negative equity occurs when the loan secured on the property exceeds the value of the home itself.

  3. Credit score - Some lenders may report a modification as a debt settlement, which will have an adverse impact on your credit score. If your credit score is on the low side and you're already behind on mortgage payments, the impact may be minimal.

  4. Can be Costly - Monthly mortgage payment and balance can go up, and likely will. Debt forgiveness can be taxable. Lender may opt for sale of the property. 

  5. Scams - A number of companies have emerged that are prepared to arrange a mortgage modification with the lender for a fee, however there is NEVER a fee with Homeowner Alliance.

  6. Using a Third Party - can be costly! Third parties charge for this service usually with an upfront fee followed by a monthly payment plan while they negotiate the modification with the bank, this usually takes 30 days.  You want to have this resolved QUICKLY.

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