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Loan Modification Myths

Applying for a loan modification can be an intimidating and confusing process. What makes the process more confusing, are the numerous myths about how to qualify and what your options are.

So below is a breakdown of some common myths to consider if you are considering applying for a loan modification.

Myth #1: You are not eligible for a loan modification until you are late paying your mortgage
There is no rule that states that you must stop making payments on your mortgage so don’t consider it an option if you can afford payments. In fact, even people who are current on their mortgages occasionally get loan modifications if they go about it the right way.

Myth #2: Loan modifications are a quick fix
While they are a great option to avoid foreclosure, banks make applying for a loan modification difficult and often frustrating. You can expect your loan modification to take three to six months and involve a lot of phone calls, e-mails, letters and so on. But stat persistent and you’ll probably get the attention you deserve.

Myth #3: Nothing you do will increase the odds of getting your loan modified
Not necessarily. An effective first step is often to ask a qualified real estate lawyer to conduct a mortgage audit or review of your mortgage loan documents. If your lawyer discovers that the lender broke the law, the lender will likely work with you to modify the loan before your payments are late. When a mortgage lender faces a lawsuit because it violated lending laws – and knows that you’re already working with an attorney – the lender may be more apt give you a favorable loan modification.

Myth #4: Mortgage lenders and servicers are your friend
Wrong. They have fund organizations like 995-HOPE so they appear to be helping homeowners but its often not in their best financial interest to assist homeowners. Also, lenders have fired thousands of employees who are to blame for approving faulty loans and do not have nearly enough people to help cash-strapped homeowners. If lenders really wanted to help homeowners, they would hire many more people to work on loan modifications – and they would be more helpful and willing to modify loans.

Myth #5: If you file for bankruptcy, the lender will refuse to modify your mortgage loan.
Not necessarily. Lenders want to make sure you keep paying on your mortgage and don’t default. And, after you file for bankruptcy, your lender must act according to the orders of the bankruptcy court. So if a loan modification is the best solution, and if you’re considering bankruptcy, call and ask the mortgage lender or servicer to send you written guidelines about loan modifications during bankruptcy – that way you have in writing should you need to appeal later on.

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