Pennsylvania Mortgage Modification
As has been typical during the recent housing crisis, there is a lot of misinformation out there. In some cases, this misinformation has caused false hope.
Loan modifications can be a very good solution under certain circumstances. Unfortunately, most homeowners who find themselves under the threat of foreclosure are living in a financial situation beyond the help a loan modification can provide. In some cases, a loan modification can leave them worse off than they were before.
Some homeowners believe that a loan modification is the same thing as principle forgiveness. The reality is, a loan modification simply reorganizes the loan to provide temporary financial relief.
Before making the decision to rely on a loan modification to solve a mortgage crisis, homeowners should ask themselves the following questions:
Has The Bank Already Begun The Foreclosure Process?
If the bank has already given notice of default, then the clock is ticking. In the past couple of years, there have been cases where foreclosures have taken as long as 2 years before homeowners lose their homes, but those days are gone. Today, foreclosure happens much more quickly, which means that homeowners have less time to educate themselves on their options. A loan modification might be a solution, but there are may other options to consider.
How Much Other Debt Do I Have?
For some homeowners, a brief, unexpected issue may have put them in a financial bind that is threatening their home. For most homeowners, however, their financial issues are not limited to just their mortgage. Many of these people have found themselves in quite a lot of debt. If you have a high to debt-to-income ratio, there is a much smaller chance that a bank will be willing to grant a loan modification because of the chance of re-default. In those cases, the bank may determine that a foreclosure makes more financial sense for their bottom line.
Is The Issue That Is Causing My Hardship Temporary?
If a homeowner unexpectedly loses a job or finds that a temporary health issue has created the hardship that now threatens their home, but they know that the situation will resolve itself if they can simply buy themselves a bit more time, then a loan modification could be a very good solution. However, if the problems are more widespread and have no real end in sight, then a loan modification will be unlikely to help in the long term because of the high likelihood of re-default.
Is It Mandatory That I Stay In My Current Home?
The number one reason why a loan modification is such an attractive option is that it allows the homeowner to stay in their home. By exploring other optons, like selling, renting the home, refinancing or a short sale, homeowners open themselves up to the possibility that there might be a better solution for their situation than a loan modification.
Have I Considered Other Options?
There are lots of other options for homeowners in this situation that will allow them to walk away from an unmanageable mortgage on their own terms. A short sale, for example, allows homeowners to settle with the bank with dignity and with a minimal impact on their credit scores. In many cases, the homeowner can be back on their feet in anywhere from 6 -18 months.