Does Mortgage Modification Make Sense?

Our current economy is very ill. Loss of jobs at a record high, the housing market slump, and the failures in the banking industry are all symptoms of the disease. We can sit back and wish we had a new job, wish we could sell our house or refinance, and we really wish that the banks were kinder and more patient with our inability to pay the increased mortgage payment. So, we wish and wait but the magic genie doesn't appear. It is now time for action!

Mortgage modification is part of President Obama's foreclosure prevention program. The administration allocated $75 billion to the loan modification plan. Designed to provide incentives to borrowers, loan servicers and mortgage investors, the government will subsidize interest rate reductions. The plan has not been designed to use taxpayer money to assist borrowers that committed fraud by lying on their loan applications or irresponsible homebuyers. Modified mortgages will result in reduced payments for five years. The hope and goal, of course, is to allow responsible homeowners the opportunity to remain in their homes. As an additional bonus, borrowers that remain current with the new payment will receive up to $1,000 each year as a principal reduction of the mortgage for the five year term of the modification.

Loan servicers and mortgage investors will also benefit from the plan. Each loan modified will result in $1,000 to the loan servicer along with additional annual bonuses if the borrowers continue to make the new payments. Mortgage investors will receive a one-time payment of $1,500 for each performing loan restructured under the plan guidelines.

Assess the options and possibilities that do exist in your world. If you are employed, thank God and worry about finding a new job when the tide turns - and, it will! If you are facing foreclosure or if it has become harder and harder to make the mortgage payment, a mortgage modification may be the answer. Although the new government financial incentives to banks should have paved a smoother road for borrowers seeking a mortgage modification, the reality has been quite different. Borrowers have faced long waits, incomplete information and understandable frustration.

Take control of your own financial situation. You can do your own mortgage modification. Yes, you can! And, more good news - you'll save thousands of dollars. If you are facing foreclosure, a mortgage modification may save your home. If you are struggling to pay the monthly mortgage, act quickly. The faster you take control and act, the better your chance for a successful mortgage modification. Okay, I'm convinced. I need a mortgage modification. Where do I start?

Your first step should be a complete financial inventory. What is your income and what are your expenses? How much money do you have at the end of the month when everything has been paid? Be sure this information is accurate and complete. The bank will need a list of all assets and liabilities. This chore needs to be a priority. You want to be armed and ready when you take step two.

Step two should be accomplished as soon as possible. You must call the lender. Let them know about your situation and your need for a mortgage modification. Be sure you take notes during this call and every subsequent call and keep your notes organized and in one place! Be prepared to stand up for your rights and fight for your home. A word of caution - you are not in the driver's seat so be polite, remain calm but remain firm and persistent. Next, be prepared to explain why you need the mortgage modification. It is strongly recommended that you have a draft of a hardship letter at your fingertips when you make the call. When you reach the point that you finalize the hardship letter, check your spelling and grammar. Again, be polite and remember to thank your banker for the anticipated cooperation and assistance.