Can I Use a Loan Modification Program in Order to Save my Home from Foreclosure?

With mortgage foreclosures at an all time high, major banks across the nation have begun offering loan modification programs for people who are in danger of losing their homes to foreclosure. While eligibility for loan modification programs differs from one bank to the next, the common goal of these programs is to restructure existing mortgage loans so that borrowers have lower payments. Because foreclosure is costly not only for the homeowner, but for the bank itself, the bank has a strong interest in helping people maintain their obligations under their mortgages, especially in today’s rocky economy. 
In general terms, a loan modification program is a lot like refinancing your mortgage in order to make the payments more affordable. The only difference is that instead of taking out a new mortgage to replace your old mortgage, you are simply changing the terms of your existing mortgage loan. If you are unable to make your current mortgage payments and not eligible to refinance your mortgage due to some financial hardship that you are experiencing, then you may be eligible for a loan modification program through your bank or mortgage company.
Whether you will qualify for a loan modification depends on the requirements of your bank’s loan modification program, as well as your own financial situation. While these requirements vary, the most common eligibility requirements for loan modification programs include being behind on your mortgage payments by at least three months, experiencing some sort of financial hardship that makes you unable to make your regular monthly payments, using the mortgaged home as your primary residence, and never having filed for bankruptcy. 
In order to check your eligibility for a loan modification program, you must contact the bank or mortgage company that owns your mortgage. Keep in mind that with banks being bought and sold on a regular basis, especially in the current economy, you need to make sure that you are contacting the correct company about your mortgage loan, because the owner of your mortgage is the only company that can grant you a loan modification. In any case, you need to communicate with your bank about your financial situation, take any steps you can to meet your monthly mortgage payments, and cooperate with any requests for information necessary to participating in the loan modification program.
IndyMac Bank, which was taken over by the FDIC, was the first major bank to offer a broad loan modification program to its customers. Other major mortgage companies such as Fannie Mae, Freddie Mae, Bank of America, JP Morgan Chase, and Citigroup have followed IndyMac’s lead in offering widely available loan modification programs to their customers. IndyMac, for instance, is contacting some customers who are seriously delinquent on their mortgage payments directly in order to help them enter into their loan modification program. Under the IndyMac program, the interest rate and length of repayment for your mortgage loan could be lowered in order to make your mortgage payments more affordable in terms of your current income and expenses. Thus, if you are not able to afford your mortgage payments, be sure to check your eligibility for your bank’s loan modification program rather than risk losing your home.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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