Pitfalls to Avoid in a Loan Modification Offer from a Mortgage Lender

Pitfalls to Avoid in a Loan Modification Offer from a Mortgage Lender

When the mortgage is in default, or the homeowners have received a loan modification offer from their mortgage lender, or vice versa. Although the first situation does not happen often, the point prepares to offer a loan adjustment. If the owners want to keep their home, an offer must come from them first.

When the offer comes from the homeowner, it is wise to scrutinize the mortgage lender’s response. Some of the content of the counteroffer can be a trap for homeowners. These pitfalls can only be noticed after the homeowners have already agreed to the loan modification. Even though it’s obvious they need their help, that doesn’t mean they’ll be submissive all the time.

For example, with a loan modification, late payment fees should be waived. Otherwise, this program will still not help homeowners with their mortgage problems. If the fees still add up as stated in the counter offer, that’s the same as no loan adjustment at all. Late fees plus principal plus interest are already too much for struggling homeowners.

Additionally, in a loan modification proposal, the proper spacing between the period when interest rates increase should be clear and favorable to the borrower. There should be a significant amount of time to pay off the mortgage within their actual income. For example, in the first two years of the new mortgage period, the interest rate is lower. This scheme should provide enough room for homeowners to be financially stable and make regular mortgage payments.

Remember that from the lender’s point of view, his profit comes first for him. However, the point of loan modification is defeated when homeowners are not given leeway with the amount owed and interest rates. With the current housing woes, foreclosures won’t help lenders because home buying is also weak. In addition, this property depreciates quickly when it is not maintained periodically, there is no point in keeping them.

The intent of the loan modification, according to the philosophy, is to allow mortgage lenders to get what they are owed. While in practice the owners get the chance to keep their home. This is clearly a win-win for both the lender and the homeowners.

However, lenders can also benefit from foreclosure and homeowner loan modification enforcement. So homeowners need to guard against possible pitfalls that lenders can cleverly include in the modification contract. They should not be enticed with a term loan modification at all.

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