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What Every Homeowner Needs To Know About Bankruptcy And Loan Modification

bankruptcy and loan modificationWhen a homeowner’s mortgage and other debts becomes more than they can afford to pay…they may want consider filing for bankruptcy.

If you find yourself facing a similar dilemma, know the facts about bankruptcy and loan modification before you make a final decision.  The possible solution to your situation will depend greatly on what your future goals are.

Should You File Chapter 7 Or Chapter 13?

Filing Chapter 7 bankruptcy will allow you to discharge your mortgage debt.  Discharge means you are free to walk away from your mortgage debt free and clear.  You are no longer obligated to pay money to your lender. This also means the lender can now begin the foreclosure process.  Your discharge removes your obligation to pay…but it also means you will eventually have to leave your home once the foreclosure is complete.

Chapter 13 on the other hand does not discharge your mortgage debt. However, you get to keep your home provided you continue to make your mortgage payments on time. Also while under Chapter 13 your payments will be lowered.

Can You Get  A Loan Modification After Bankruptcy…Is This Possible?

Yes it is possible to get a loan modification after your bankruptcy. In fact you can get a loan modification before and during the  bankruptcy process as well.  However the outcomes will differ depending on when you do so and whether or not you file under Chapter 7 or Chapter 13.

If you choose to reaffirm your loan which means you agree to pay the same mortgage debt you were already released from via a Chapter 7 bankruptcy,  you will need the approval of the bankruptcy court.  Most bankruptcy attorneys will advise against reaffirming your loan.

Take as much time as possible to think about your options. The legalities of bankruptcy and loan modification can be overwhelming.  For most homeowners, bankruptcy is seen only as a last resort.  A “band aid” to temporarily solve the problem, especially if you are facing foreclosure.  It is not a permanent solution in most cases, so the money spent may not be worth the results. If you can do anything to avoid filing bankruptcy

Consult with a bankruptcy attorney to understand the details and discuss your best options.

For assistance, you can visit loan modification reviews to learn about top companies or call 888-766-3693 to speak with someone who can help!

The Steps To Take When Applying For A Loan Modification

applying for a loan modificationIn a previous article “How Can A Loan Modification Help Homeowners?” we covered the basics of what a loan modification is and how it benefits you if you are having trouble making mortgage payments.

In part 2 of this series we’ll take a look at the steps to take when applying for a loan modification.  The process itself can be time consuming.  But taking the time to do things right and thoroughly can increase your chances of being approved.

Step 1

Contact your lender and ask for information on specific guidelines they may require in order for you to be approved for a loan modification. This is very important to know before you proceed to the next steps. Do not ask to qualify at this point, only ask for the guidelines!

Step 2

You will need to write what is called a “Hardship Letter.”  This letter should explain what are the specific circumstances are causing your financial problems. Also tell your lender what you’re doing to try and get your finances in order.  Remember, you’re having trouble paying your mortgage so your lender needs to be reassured that you are serious and are committed to making changes.  They want to see specific dates of when things happened to you and how this affected your ability to pay.  Anything that causes you financial stress can be used as a hardship here.  Loss of wages, unexpected medical bills, your interest rate went up – are all good examples of hardships.

Step 3

Get all of your bills and expenses together.  Take a look at where your money is being spent.  See what expenses can be eliminated. For example are you going out to dinner several times a month?  Do you really need the premium cable package? Create a new household budget without these kinds of expenses.  This shows your lender you understand the gravity of your financial situation and you’re taking steps to make needed changes.  They also require you to submit an income and expense worksheet.

Important – The income and expense worksheet should show your income minus your expenses each month.  It is a very important part of the approval process.  Most guidelines want you to be around breaking even to get approved.  This means, if you subtract all your expenses from your current income, you are left with nothing each month.  Somewhere around $100 over or under this benchmark is also acceptable.  You cannot make too much money or too little money and this is why most homeowners get denied.

Step 4

Go above and beyond other homeowners, gather some proof.  It’s not enough to just tell your lender you’re in over your head financially.  You have to provide proof to back up what you are claiming.  What kind of documentation varies with each homeowner.  If you lost your job for example, you could provide a letter from your previous employer. Even if you’re still working and due to cut backs your salary was reduced, again a letter from your employer would be needed.  If you have medical expenses not covered by your insurance, make copies of your medical bills to show your lender.  This will add credibility to your hardship letter.

Step 6

One of the most common reasons  homeowners are not approved for a loan modification is because they failed to fill out the paperwork completely and accurately.  Your lender already knows you can’t make your current payment.

But the lender also needs to be certain that you will be able to make the mortgage payment even after you’ve been approved for a lower payment.  A lower payment does not automatically mean you will be able to make your payments. Providing “before” and “after” financial statements must show that you will be able to make your new lower payments if you are approved for a loan modification.

Step 7

After you prepare all this paperwork, you can then call your lenders loss mitigation department.  Tell them you want to see if you qualify for a loan modification.  Usually, they will ask you a series of questions, most of which applying for a loan modificationpertain to your financial statements.  Just read them off your income and expense worksheet so every will match perfectly when you turn it in.  If accepted, they will ask you to then send this packet in.

Step 8

Now is the follow up part.  Remember, “the squeaky wheel gets the greasin’”! Once a week, call up your lender to check on your file.  Ask them, “Is there anything you need from me this week to help with the loan modification process?  Is all the paperwork in my packet still current?” and other questions like these.  If you do need to submit any more paperwork, they will let you know.  They will also note in your file your phone call records and see that you are actively pursuing the modification.  Just remember, never get upset with the person on the other line – even if you are getting angry.  They get many phone calls a day from angry customers, so it is best to try and stay on their good side.

A Final Word Of Encouragement

You may feel like it’s too much to deal with, but if you don’t deal with it… you run the risk of losing your home.  So now is not the time to give up!

You can do this!

Part 3 of this series will cover one of the most important steps to getting approved for a loan modification.  “How To Prepare A Hardship Letter” will define what a Hardship Letter is and how to write yours to increase your chances of getting your loan modification approved.

 

Call 888-766-3693 if you have any questions about modifying your loan.  You can also read our loan modification company reviews if you decide to use help for this process.

How Can A Loan Modification Help Homeowners?

loan modification helpEvery day in the news you hear about homes going into foreclosure in record numbers.  Job loss, too much debt and a long list of other circumstances are causing thousands and thousands of homeowners to lose their homes everyday.

If you are a homeowner having a difficult time financially and fear you may eventually lose your home to foreclosure …there are options you can consider before it’s too late.

One option that millions of homeowners have used successfully is called a loan modification.  It could be the answer to help you keep your home too.

So first let’s look at what a loan modification does.

A loan modification is where the lender allows a homeowner to lower their monthly mortgage payment.  This can be achieved in a few different ways.

 

1.) Your lender can lower your interest rate.
2.) The term of your loan can be extended.
3.)Your principal balance is reduced.
4.) You may also be given a different loan or a lender can combine any of these.

Now let’s see how each of the above helps in more detail.

How Can A Loan Modification Help Homeowners?

Here’s a  common scenario with many homeowners  who eventually lose their homes.

The original monthly payment was manageable and mortgage payments were made with no problem.  Then over the course of the loan the interest rate increases. Unfortunately, in many cases salaries do not increase at the same rate.  Then there are other household bills that must be paid. Including medical expenses not covered by insurance.  At some point in time, the ability to make the monthly mortgage payments becomes more and more difficult.  Eventually, a homeowner stops making the payments completely.

To help a homeowner in this situation, a loan modification that reduces their current interest rate lowers the monthly mortgage payment can be used by their lender.

Here’s another example of how a loan modification helps homeowners.

If you have for instance a 30 year mortgage.  You can negotiate a loan modification to extend the length of your loan to a 40 year loan.  Now you have more time and a lower payment, since you are paying off your mortgage in 10 more years than before.

Finally, if you need more help than these solutions can offer, you can negotiate for a combination of these terms with your lender. For example you may need both an extension on the length of your loan and a reduced interest rate in order to pay your mortgage.

There are alternate loan help options available as well. It all depends on your specific situation.

Whether or not any of these scenarios describes your current situation, if you are struggling for any reason with trying to pay your mortgage…you have to take steps now to secure your home and work towards creating a healthier financial future.

Call 888-766-3693 if you have any questions about modifying your loan.  You can also visit Loan Modification Company Reviews to read about companies who can help.

It can be an overwhelming and stressful time in your life. But you can make the choice right now to take steps to turn things around. You worked hard to buy your home, it is a symbol of accomplishment and pride.  You have options to explore.

Are You Ready To Take The Next Step?

You now know more about loan modifications and how they can help you.  Next is to learn the “Steps To Take When Applying For A Loan Modification.”

Bank of America Loan Modification Programs 2012

bank of america loan modification programFor those homeowners who are looking for a Bank of America loan modification program, this will hopefully be of some help to you!

If you have a loan with Bank of America and you are having difficulties making your payments or maybe not even making your payments at all, a loan modification might be the answer you are looking for.  However, a modification is not suitable for all homeowners.  It all depends on your unique situation, your homes value, how much income you have coming in, etc.

Bank of America has in house loan modification programs as well as government sponsored programs.  They are also participating in the Principal Reduction Alternative program, but most people I have talked to have been transferred out of that department after a few weeks and back to the hope department.

They are currently testing out a “lease back” option to homeowners in a couple select states.  They offer homeowners near foreclose the option of signing their house back over to B of A and renting back the home for up to 3 years at current market rent rates.  Sounds good, unless you want to try and keep your home.  They will sell it at some point and you have to move out.  Most homeowners are not in favor of this program.

Bank of America has several loss mitigation departments and they are notorious for transferring customers to different departments, often times requiring the homeowners modification paperwork to be faxed in again and again…ugh!

For homeowners who are having difficulties making the payments and have an income coming in, a loan modification program is the way to go.  Especially if you are late on your payments, because once you are approved for the program you can’t be foreclosed upon until they decide to approve or decline you.  This can stop a foreclosure sale date and give you time to work out a loan modification.

I suggest trying to get approved yourself (even though this site is based on reviewing companies who can help) and if you get denied try calling one of the loan modification companies we recommend.  BestMortgageLoanModification.com has a ton of experience with Bank of America and they are federally compliant.

If you are late on your payments, they can help you as well.  They were previously able to successfully obtain modifications with B of A for those who were delinquent within a reasonable time frame.  They are able to assist homeowners who are late on their payments – it is much more difficult to get a loan mod approved for those who are current.  If you have a foreclosure sale date (you are WAY late payments..), they can stop the sale date BEFORE you pay them.  This typically costs less then filing BK as well.

Bank of America has been known to step up in the past and actually approve loan modifications for distressed homeowners, but they are definitely not the easiest lender to work with.

This means you should take action and be prepared to work to save your home!  Be sure to prepare a financial worksheet before you call them so you can be sure you fit into the guidelines…

Good luck with your Bank of America loan modification program and thank you for visiting our website.

You can read reviews of all the companies who can help get a loan modification approved here–> Loan Modification Companies.