The economic melt down has taken its toll on both corporate giants as well as individuals. Big US companies like the Lehman Brothers have been forced to apply for bankruptcy. Individual homeowners are spending sleepless nights over their mortgage payments problems and threats of foreclosures.
One of the greatest challenges for President Barrack Obama after his election was to salvage the housing market out of its inextricable quagmire and help the struggling homeowners to protect themselves against the ever-plummeting property values.
A plan was, therefore, drawn up to modify the loan terms so as to make it easy for the homeowners to pay back their loans.
What is loan modification?
As the word itself suggests, loan modification means reworking the loan terms of the borrowers to make it easy for them to pay back their housing loans. This, in effect, means reducing the rate of interest, extending the loan term and reducing the principal balance. The plan aims at helping the homeowners facing the consequences of payment defaults leading to foreclosures and bankruptcies.
The loan modification is not only aimed at helping the borrowers but the lenders as well. The process of repossessing the property of the defaulters is neither convenient nor a profitable option for the banks in view of the plummeting values of the property. It becomes all the more difficult for them to realize their loans if the borrowers go bankrupt. This may lead to total or substantial loss of loan money to the banks.
The Obama Administration, therefore, allocated a staggering $75 billion fund to rework, restructure or in other words modify the mortgage loans. It was indeed a big bet but did not show the expected results. According to an estimate by the bank regulator, almost 53% of the modified loans went bad in last December - within the first six months of their launch causing huge frustration to the borrowers.
Mushrooming of fraudulent loan modification helpers
The so-called experts who are always on the lookout for business opportunities found the loan modification plan outlay as a huge source of earnings from the harassed borrowers. These ‘helpers’ scourge the foreclosure notices and contact the borrowers with offer of help by negotiating with their banks to lower the interest rates, etc.
They charge heavy fees for their services. Their fee, sometimes, can be as much as a monthly mortgage payment that amounts to thousands of dollars. Some of the experts even vanish after collecting the upfront fees from the borrowers.
It has been reported that as many as 189 legal actions have been initiated against the loan modification consultants who have been accused of cheating the desperate and gullible homeowners.
Foreclosure threat
The loan modification plan does not provide any relief to the borrower against foreclosure of his property if he fails to live up to his obligations agreed upon in the loan contract.
According to a survey, only 10% of the applicants succeed in getting their loan terms modified by their banks. The reason is that the decision to ease the terms rests with the investors who own the loans.
Moreover, the lenders are using the loan modification plan to drive a final nail in the foreclosure. They argue that a borrower who cannot repay his loan despite the modified terms deserves foreclosure.
It is also argued that when the debt situation goes so bad, it cannot be redeemed by conventional means because the home values are going down all the time. Desperate maladies require desperate remedies.
A situation like this calls for professional help or attorneys who can look into your options and fiercely defend your case. An experienced attorney can provide you the much needed guidance and get you a loan modification when others fail to do so. If you are facing a problem getting a loan modification, then its time you approach an attorney who can fight for your rights at affordable rates.