Though the intent of home loan modifications is honorable, it is clear the system is broken. Obama's making home affordable program was intended to help homeowner's avoid foreclosure. You can read about how the program was intended to work at makinghomeaffordable.gov.
If you decide to go for a loan modification. Here is one piece of advice: Somewhere along the process the lender will allow you to make a lower monthly payment while your application is being processed. DON'T DO IT! Keep paying your original amount unit you are actually approved. Why you ask? Isn't a lower payment the whole point?
Here is the reality, it is highly unlikely you will get approved. As many sources have pointed out, very few homeowner's are getting approval. Like I said the system is broken. So here is what is happening to many people attempting loan modification.
They make application. They are told they can make a lower payment while their application is being processed. The lenders will take several months processing the application. The lender will likely have a never ending list of needed paper work, that they will say they never received. The lender will then deny the application on the grounds the homeowner never provided the needed paperwork in spite of the homeowner sending in the documentation two, three or even four times.
And guess what, since the application was denied, the difference between the original mortgage payment and the lower payment the lender told you to make while your application was in process is now treated as LATE PAYMENTS. Since your application took 6 months to process (and be denied), you are now 6 months behind on your mortgage payment. So if you can not come up with the cash to get current on your mortage (and chances are you don't since that is why you were applying for the modification in the first place) the lender now starts foreclosure proceedings.
So the program that was intended to help keep your home is actually causing you to lose it.
Saturday, February 12, 2011
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