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Mortgage modification has been in the news a lot in the last two years. Like a new buzzword, the term has cropped up in newscasts, rarely with a full explanation. Mortgage modification is a change in the terms of an existing loan without refinance. These terms are mutually agreed upon by both the borrower and to the lender. Borrowers stand to possibly reduce their interest rates, reduce their principals, reduce late fees, reduce penalties, lengthen the term of their loan, and reduce their payments. Mortgage modifications not considered advantageous by most lenders. They can collect less interest if the interest is reduced, and the other changes in terms can signify loss of income for them. Mortgage modifications are great for homeowners in difficult times. These changes in terms can make the difference between staying in a house and foreclosure. With all of the recent buzz about mortgage modification in the news, you would think that mortgage modification is the latest new thing. In fact mortgage modifications have been common for quite some time. During the period known as the Great Depression, some states had passed their own mortgage modification programs. With the economy faring relatively well before our current Recession, mortgage modifications were all but forgotten. If you would bring it up to your bank, they would have tried to convince you that it was an anachronism, and that what you really wanted to do was refinance. Refinancing can bring you more advantageous terms if your credit has improved since the original loan, but there are closing costs involved, and you have to read the terms very carefully to make sure you understand the risks. Lenders often make it difficult to be considered for a modification. Lists of requirements include full current financial documentation, current credit report with annotated explanations, monthly cash flow statements, paystubs, utility bills, bank statements, documentation of other recurring expenses and a hardship letter. The criteria for the paperwork is very exacting, and the hardship letter must cover a hardship that is considered valid by lenders. Hardship can be due to death in the family, reduction of income, loss of work, relocation for work, catastrophic illness of self, spouse, or immediate family member. Whenever a complex program becomes available that people can benefit from, many people become eager to take advantage. Because some of these people do not feel confident undertaking such a project because of the paperwork and telephone call and research burden involved. For them, there are a new breed of business that has been growing in the bad economy. The service companies that assist in the process of applying for a mortgage come in two legal varieties, the for profit and the not-for-profit. Both can be either good or bad as far as service is concerned. There have been a number of complaints about the high fees charged by some companies to assist in the process. Some companies charge thousands of dollars. Many often falsely claim they are affiliated with the government in order to gain consumer confidence and get the money. Some


of these agencies make a halfhearted effort to get modifications. Some make a legitimate effort, but even they are hampered by a system where the banks can put up many obstacles to success. The Federal Trade Commission has vowed to crack down on mortgage modification companies as of April 2009. You can read more about the process on the FTC's Website. Barack Obama made an announcement on February 18, 2009 that there would be incentives to lenders to consider people for mortgage modifications provided they met certain guidelines. The act, known as the Homeowner Affordability and Stability Plan, was supposed to change the requirements for qualification for loan modification in favor of homeowners who would not have qualified previously. People were full of hope that they were about to get relief and stay in their homes. Many had their hopes dashed, when lenders created more barriers to mortgage modification than ever before, to combat the new legislation. Although these lenders are not in compliance with the spirit of the law, they make sure they are compliant to the letter of the law. The full information and counseling is available from the official government source(Department of Housing and Urban Development or HUD).. Here, homeowners can select their state and be referred to HUD-approved counseling agencies. These agencies are qualified to assist homeowners in applying for these mortgage modification programs. The listings you will get from HUD are programs that meet eligibility criteria designed to protect homeowners from mortgage modification scams.

By Martin Low Brought to you by: Houses Wanted on Long Island, New York http://houseswanted.org

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Understanding Morgage Modification