The best definittion of a loan modification that I have heard was from Bob Massey on Fox News a couple months ago: "A loan modification is nothing more than glorified rent." Homeowners considering working with their lender to get approved for a loan modification need to understand how much MORE they will be paying for their home.
Looking at the big picture, loan modifications seem to benefit the banks much more than the homeowners. IF (and that's a BIG "IF") a homeowner actually gets approved for a loan modification:
- Is the reduction enough to make a real difference to the monthly family budget?
- Can the homeowner continue to keep up with the mortgage payments long term?
- What happens if they fall behind in payments again?
Statistically, 60% of all homeowners who apply for a loan modification end up in foreclosure. At first signs of struggling to make a mortgage payment, homeowners need to talk to a knowledgeable real estate agent about selling their home through a short sale. Yes, they will have to move out of their house but it will be with peace of mind.
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