Arguably the easiest way to defend against a foreclosure is through a loan modification. A loan modification is any change to the original terms of your loan – and many mortgage companies are more than willing to work with homeowners on this process. Mortgage companies aren’t in the business of owning homes, and foreclosures often result in a loss on their books, so helping you stay in your home is actually beneficial for them, as well.
In 2009 Congress stepped in to help by passing a temporary program specifically designed to give struggling homeowners easier access to load modifications, while ensuring that the lenders would be required to work cooperatively with homeowners through this process. Dubbed the Making Home Affordable (MHA) program, it offers modifications such as:
- Reducing your interest rate
- Extending the terms of your loan
- Principle balance reductions and forgiveness
- Rolling your past-due payments into the total loan amount
- And more
As soon as you apply for a loan modification with your lender, they’re required by law to freeze all foreclosure proceedings, usually for 30-days at a time. If your loan modification is approved, the foreclosure will be stopped permanently and you can move forward with your modified loan and payments. However, if your loan modification is declined, the foreclosure will proceed as normal, picking up right where it left off before it was stopped.
That’s why it’s important to stay diligent and work with our experts to explore other options while your loan modification application is pending. Not all homeowners qualify for a loan modification so you’ll want to have a back-up plan, just in case.
A word of caution about loan modifications and foreclosure, though; this is not a choice best made at the last minute. Unlike bankruptcy, a loan modification application is not an instant process. So, if your foreclosure sale is looming, just a few days away, a loan modification may not be your best option.
Meet with our consumer advocates today, to learn about all of your options!