When a borrower can no longer satisfy the terms of the loan because of the rates, many borrowers might feel that they are stuck in a bind and can do nothing to save their home. However, loans are not set in stone and there are many loan modification services that will make it possible for the borrower to obtain much lower and more affordable rates. Loan modification programs are legally binding contracts between the lender and the borrower.
Most often, homeowners will initiate this type of plan when they are facing foreclosure or bankruptcy. However, homeowners can initiate the process at any time, regardless of whether the borrower's payments are on time. The state and federal government will often provide a mandate that forces lenders to change the terms of the loan in order to help the borrower avoid financial hardship. However, lenders will also initiate these programs when they believe that they will receive more money by having the borrower continue to make payments, even at a reduced amount, than they would by foreclosing on the house.
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Numerous changes can be made to the loan, including changes to the interest rate, the loan's principle of the late fees. Homeowners can also extend the terms of the loan and establish a new monthly payment that is based on the homeowner's income. This allowance is especially helpful to many individuals who find themselves making less money than they were in previous years, or even in the midst of unemployment.
The modification usually has specific requirements that the borrower must meet that are set by the lender or the government mandate. The borrower usually must establish a track record of making payments, proof of financial hardship and the individual's income. Once these circumstances are verified, the changes to the program of payment can be applied.
Loan modification programs are usually offered by lenders in anticipation that a certain number of borrowers will not be able to pay of the loan. Most borrowers apply for the government loan modification and then apply for the in-house modification program if the government program is rejected.
Many attorneys will provide services of this nature. These attorneys will bring their knowledge of lending laws to the table and will handle negotiations between the borrower and the lender in order to secure the best possible terms for both concerned parties. Through this process, the amounts exchanged remain fair and do not require borrowers to live outside of their realistic means.
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