A couple of years ago, President Barack Obama of the United States introduced the Federal Loan Modification Program as a way to mitigate the effects of the collapse of the housing market. The United States Treasury allocated over $75 billion for this Federal Loan Modification Program, which aims to rework or modify up to 4 million in distressed American mortgages. As reported by Forbes and disclosed by the project’s goals and objectives, the program will “use blunt cash incentives to get servicers, lenders, investors, and borrowers to rework distressed mortgages into ones with lower more manageable payments equal to 38 percent of a borrower’s income.” Just ask any one of the numerous loan modification lawyers out there, and they’ll agree with President Obama and the U.S. Treasury that loan adjustment is a great way to relieve the burden that financial obligations bring.
As any foreclosure defense lawyer will tell you, a loan adjustment program will really help out a person facing deep trouble brought about by financial obligations. For instance, in the case of the aforementioned Federal Loan Modification Program, loan adjustment is meant to restructure the mortgages of those 4 million homeowners so that creditors won’t have to foreclose on their homes.
What is loan modification?
According to Investopedia, a loan modification is basically a “modification or adjustment to an existing loan made by a lender in response to a borrower’s long-term inability to repay the loan.” Usually, as per loan modification lawyers, this can involve one or a combination of the following loan adjustment strategies:
1. Extending the time period of the loan or when it has to be repaid.
2. Reducing the interest rate or adjusting the payment options of the loan.
3. Changing the loan or modifying it into a different type of loan altogether.
4. Reducing late payment fees and penalties.
5. Putting a cap on the monthly payment that is equivalent to a percentage of the household income.
6. Reducing the principal.
The loan modification programs available to a borrower will depend largely on the state he or she is in at the time of loan adjustment application, whether the borrower is current, late, bankrupt, in default, or in foreclosure.
Ultimately, lenders offer these various loan adjustment programs to borrowers who cannot pay on time, as a performing loan where a borrower consistently pays on time is more valuable than the amount a lender makes off a foreclosure sale. According to an article in CNN Money by Les Christie, a lender is motivated to offer better loan adjustment terms to a borrower because of the expectation and prospect that a performing loan is more valuable in the long run than the proceeds taken from the sale of a foreclosure.
For anyone who is looking at a prospective foreclosure or any other penalty caused by difficulties with loan obligations, loan modification lawyers advise to get assistance through a loan adjustment program. Or if that isn’t available, assistance can be received from a foreclosure defense lawyer, who will make sure that your financial obligation can be helped.
Imelda Dilick is a bank employee who has had the experience of working with loan modification lawyers, and knows first-hand how effective a foreclosure defense lawyer is at helping people with financial obligations.
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