The economic situation over the last 18 months has lead to a huge focus on housing. Following the implementation of the economic stimulus package, President Obama has taken steps towards laying out a plan to help homeowners stay in their homes and to help stave off foreclosures. One area that has been of concern is that of loan modifications. In the past they have not always been done with the best interests of homeowner in mind, in fact, many loan modifications were done with intention of defrauding homeowners. .
Part of the reason why loan modifications have become such a hot topic lately is due to these fraudulent modifications. Loan modifications allow home owners to renegotiate their home loans based on changes in their circumstances. This has become important in situations where dual incomes have been reduced to single incomes due to loss of employment. The new loan conditions take into account the families reduced income.
The negotiation of a loan modification could include one of several ways to lower payments. These include:
A decrease in the interest rate
Monthly payments amended
Loan balances reduced
Payment terms amended
One tool now available to homeowners and their legal representatives is what is known as a loan audit. This closely examines the current loan conditions to determine if the loan meets all legal requirements. It has been found that as many as 80% of all loans fail a complete audit. If a loan does fail a complete audit, it is in the lenders best interest to renegotiate the loan since legal action could prove to be far more costly.
Lenders are not keen to see a loan audit undertaken particularly if they know their loans have always walked a tight line between being legal or illegal. Even simple processes like providing the correct notification periods for changes in contract terms can render the lender in breach if they have been a day or two out.
If lender violations are detected, the homeowner or their lawyer is in a position to negotiate a beneficial loan modification. In some cases the borrower may be entitled to refunds of interest paid or some other form of compensation. In rare cases, the whole loan has been wiped.
Loan modifications are now designed to help all parties with the primary intent that of keeping people in their houses. There are Federal government funds available to help subsidize those in real difficulties where that difficulty is only temporary and can be resolved over time.