Q: I'm four months behind in my house payment. Can I still go to the lender and ask for a loan modification?
A: You certainly have the right to ask, but the odds are overwhelming that you will be foreclosed.
Like many borrowers you likely have an impossible situation. If you were current on your mortgage you would have no grounds to ask for a modification. Having missed four payments your credit may be so damaged that you no longer qualify for either a loan modification or a new loan with another lender.
Borrowers hit with rising payments or who cannot otherwise pay their mortgage should not wait for months to resolve the problem. Instead, try to refinance or modify the loan while you still have good credit, the time when you have the most leverage in the marketplace. The moment you see that a payment will be missed contact an attorney, legal clinic, your state attorney general or a community housing group and ask for help. Don't be embarrassed and don't delay.
As to national programs designed to "help" those with exploding ARMs and other toxic loan products, the odds are against you. As an example, in May HUD issued a news release that said that the "FHASecure product has helped 200,000 homeowners refinance their mortgages and avoid foreclosure." However, as of the end of April, HUD reported that only 2,276 delinquent conventional borrowers refinanced with an FHA loan. In other words, the sentence in the news release means that about 198,000 borrowers with good credit refinanced – and only about 2,300 borrowers were saved from foreclosure.
If you have a toxic loan, one which will surely lead to higher costs in a few months or in a year, think about refinancing now, before your credit is damaged. Gather your paperwork and be prepared to fully document your income, assets and debts. Also, be aware that many refinancing programs require little or no cash at closing - instead the new lender will pay the closing costs in exchange for a larger loan amount or a somewhat higher interest rate. This "higher" interest rate is not a problem if the new interest level is less than the rate you're now paying or will shortly pay.
A caution: Many toxic loans have stiff prepayment penalties that assure that borrowers must either pay higher monthly costs or face grossly unjustified penalties. Beat the system by planning ahead. Start saving now for higher payments -- and then refinance as soon as the prepayment penalty period ends.
I feel for all the people struggling with Mortgage problems that read this and give up.
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