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Loan Modifications: The Right Way

By
Real Estate Agent

You're up to your eyeballs in debt.  You are standing on the kitchen stool to see above the wrath of paper.  You don't answer your phone.  You are embarrassed to get your mail but figure after dark, nobody will see you and it is safe as you think someone is spying on you. 

photo courtesy of paperscreams.com

There are so many ways to make a peanut butter sandwich:

Crunchie Peanut Butter
Smooth Peanut Butter
Really thick peanut butter in the center
Toasted Peanut Butter Sandwich
The half and half Sandwich  -  Crunchie on one side and Smooth on the other

This is what you are doing to survive besides alternating with a side course of Mac n cheese.  But this isn't doing anybody a world of good (even if you add jam or jelly to those sandwiches).  One of the things that you must concentrate on is yourself, first.  Eat healthy and don't neglect yourself healthwise.

Now while word is out that the majority of Loan Modifications fail is because it's not just about modification of the loan but reviewing of the other financial commitments.  Where do you stand?  Do you have money if a medical emergency arises?  Your gas bill just shoots through the roof during the winter .... will your current paycheck carry it or do you need to get an extra job during the winter season to assist your house budget?

An analysis of your monthly spending and credit card habits are critical for survivorship in a loan modification.  Properly budgeting is essential to survivorship people.  If you are an individual that sees a sale and must buy, you would be a candidate for high failure in a loan modification.  Don't fool yourself into thinking that you can change your ways with your spending sprees.  It would hold for about one year and then you'd go wild ..... simply crazy and you try to rationalize within yourself that just this one little spending spree won't hurt.   It's like alcoholism - it's hard and it takes a strong commitment even when we become weak.

While people blog and write about the failures, what needs to be understood is the psychological mindset of the individual or families involved in loss of a job, disability overnight, cut back of hours.  The guilt, the depression of feeling like a looser when what most don't understand that about out of 20 of your neighbors, 14 of them in financial distress as well.  So, you have to eat what is on sale at the store - who isn't!  It's hard for most who are in financial straights to meet someone "of authority" every month and hence if it isn't someone who appears to be threatening to them, the "disgrace" that they feel deep within isn't so bad and hence while others may not understand ....... it is much easier to adjust behavior  with someone the consumer trusts and when things go whacko in the budget, the consumer will be more apt to respond during those stressful times and not feel sooo much guilt.

It's not easy.  It's tough but once payments are regular ... the stress level decreases.  The self-worth starts coming back.  Oh, don't think that there won't be "flashbacks" down the road when something goes just a little off in your life.  It's normal. 

So, I will say breath.  You are not the only one in the boat.  But for pete's sake, please reach out right away as soon as you know your financial situation has changed.  Granted, banks are not used to restructuring loans or holding real estate as inventory, so cut them some slack as well.  If you understand this, then you are on your way to recovery.

 

 

 

 

 

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This information is provided to you by Barb Van Stensel with a commitment to support the Chicago, IL community.

 

 

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Comments(7)

Dean Akey
Saint Charles, IL

Great post Barb.  I completely agree with you.  I hate to see the negative press regarding loan modifications as I do believe they will be a valuable tool in the future benefiting both lenders and borrowers.  I think many existing loan mods failed due to the way they were structured.  I also believe that once we have well designed consistent programs this program will be a big success.  Thanks for the post..

Dec 11, 2008 05:03 AM
Eric McGowan
Moody, AL

Barb great advice. Many wait until the last minute and then try to react. Being proactive about your situation is always better than reacting to everything when there is little time left. Merry Christmas and happy new year to you.

Dec 11, 2008 05:03 AM
Nicole Weidauer
Keller Williams Greater Seattle - Shoreline, WA

This is great advice- but the other key thing they need to do is to deal with their way of thinking and acting with money, after all, that is most likely what got them into the mess in the first place.

If you were amongst the thousands of homeowners who bit off more than you could chew (seriously, I know you're out there) then this is a time to look yourself in the mirror and fix your way of thinking. The days of easy money are gone. In order to take control of your money, you need to take control of the man in the mirror. Re-examine your beliefs about money and start making changes, yesterday!!

Also be sure to check out Dave Ramsey. He has put me on the path to financial peace. I am so thankful I found him earlier this year- before everything went to poo. www.daveramsey.com

Thanks for sharing, Nicole Weidauer

The Egerer & Weidauer Team, Keller Williams Realty North Seattle

Dec 11, 2008 05:04 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Some great points, Barb. Statistics show that only 50% of those who experience foreclosure ever talk with their lender. While it's not easy--we're admitting to failure on our part--it's the only way to salvage the situation. Most lenders are eager to work with those who show both the willingness to communicate and the ability to repay.

Dec 11, 2008 05:07 AM
Beth Forbes
The mortgage help you want when you need it. - Center Valley, PA
Your 24/7 loan officer

Barb- This is an excellent post in light of the recent news we've had about loan modifications. If you are lucky enough to get a modification from your lender you also need to modify yourself!

Dec 11, 2008 05:16 AM
Barb Van Stensel
Chicago, IL

DEAN:  I'M WITH YOU 100%.  I especially liked "once we have well designed consistent programs"!

Eric:  It is about being proactive.  Merry Christmas to you my friend!

Nicole:  Thank you for some great additional advice.  It is so hard for people to be pro-active because I believe they are fighting some "demons" within themselves that make them feel soooo bad that they just want to run and hide and hope it goes away the next morning and then the morning after that ....

John:  Isn't is a shame that 50% of those who experience foreclosure ever talked to their lender?!!  What people are afraid of, I believe, is that if someone talks rude to them, is short temper, asks them a ton of questions as if they are up for murder, they shy away and wait for the day that those energies will come.  But they don't in most cases. 

Dec 11, 2008 05:20 AM
Barb Van Stensel
Chicago, IL

Beth - thank you for stopping by.  I believe that while the consumer needs modification, most don't understand how to do that.  They have never experienced structure financially before and now they need to go to Budgeting Your Life 101 overnight.  Easier said then done.  But it can be done people.  It can.

 

Dec 11, 2008 05:23 AM