When President Obama set out to establish an assistance resource for homeowners that could not afford their payment any longer, many people grabbed on to the glimmer of hope. But the Home Affordable Modification Program, in effect since 2009, did not produce exact results. In fact, many people were left worse off then where they started.
What Is a Mortgage Modification?
Under the Home Affordable Modification Program, homeowners who could no longer afford their current loan payments could seek relief from lenders. Mortgage providers were basically required to open the door for modification considerations on existing loans in order to make payments more reasonable. The terms of the original loan were reworked so homeowners could secure a smaller, more manageable monthly payment.
Unfortunately, due to the high demand for modifications, lenders became overwhelmed. This led to the need for trial modifications to give lenders time to review an applicant’s finances. In the event the modification is granted, the modification becomes permanent and the borrower continues to pay monthly under the new modification terms. However, if after the trial modification period has ended and an applicant is not approved, the borrower is back at square one and faces foreclosure on a loan they can not afford.
No Guarantee With Modifications
The reality of the HAMP effort is many of the temporary modifications were later denied permanent status. Modifications were cancelled after a homeowner could not stick with the new payment structure. In some cases, homeowner’s that did pay as agreed during the trial still had their modifications canceled. In all cases, borrowers were financially obligated to pay all late fees and the balance due or face foreclosure.
There is speculation that home modifications were denied on purpose to benefit the lender. Currently many top lenders are on the receiving end of class action suits filed by disgruntled homeowners. Any win in a lawsuit will not provide relief for struggling homeowners, as the trial process is long and lenders want their money. Lenders often do not waste time in issuing late fees and other penalties for loan defaults. Additionally, your own credit score will suffer negatively.
How To Decide if A Modification Will Work
The first thing a homeowner needs to do when facing financial issues is start to plan ahead. Rushing into any modification without a clear objection will led to decisions which may not turn out in the best interest of the homeowner. Take a very god look at your current mortgage, your budget, and be honest about your ability to afford your current home.
If you plan to stay in your home, you need cut expenses where you can or supplement your income to meet your financial needs. Refinancing will likely not be an option if you are already in trouble but plenty of borrowers find ways to get back on track. Contact your lender about other programs or options for temporary hardships if a modification is not in the cards.
If you face the facts and realize the home your live in is no longer affordable, make plans to sell your home before foreclosure proceedings have begun. It may be difficult to find a buyer or to get the price you are looking for on your home, but you’ll need to weigh your options carefully and act in a timely manner to ensure you can effectively remove yourself out from under the current mortgage.
A home loan modification is not a guaranteed fix but it can be an option for eligible homeowners. Speak with your lender about your options for saving your home or avoiding foreclosure as soon as you recognize financial hardships.
