Ideas towards Debt Relief

The first word when associate with debt is stress and debt relief is relaxation. In the similar way when we decide to take debt, people should give thoughts to ways for debt relief. The market is overflowing with companies who offer services dealing with debt relief. But can they all be trusted and are the ways they offer the best ones with regards to your debt. Help should always be welcomed but cautiously as like in any other industry or business, there are fraud and scamming companies in this sector too. So, what does one do and how to go about the process?

Well the first step towards debt relief is to understand the debt situation clearly. As correct for any financial transaction, we do not always consider all aspects of it when we agree to it. Such as when agreeing a student loan or mortgage on a house we overlook the years and exceptions in rules for debt exemption. It is a common error on the part of debt owner as these terms and conditions are often in small print on the agreement or are explained by the dealing party in a way that does not emphasise their impact. So, the first point to start when regarding debt relief is to know absolutely everything about the debt conditions.

The next step is to know the local legalities regarding debt relief and their relevance to the specific case. It is at this point that often people get confused and start stumbling due to lack of knowledge in the aspect. The best solution to this problem is to look for answers online and research the situation in depth. Technology has covered the distances to enormous lengths and almost everything is available on internet. Once, there is a better idea of the legal conditions and its relevance an approach can be formed. If there are still doubts regarding the legal conditions of debt relief, professional help can be sought.

When considering professional help it is good to go by reputation of the firms. There is always a risk that wherever we go it might be a mistake but sticking general consensus of good usually works. Once professionals get introduced it is important to not get laid back and take everything for granted. One should be as involved at each step of the process as the professionals because at the end of the day nobody cares about your debt relief than yourself.  

Debt Settlement: Is this better than Debt Consolidation?

Debt settlement is a situation in which both parties; creditor and debtor, agree on a reduced amount to be repaid over a fixed period of time. Debt consolidation is a process where a person either takes a loan to repay the creditors at once or engages a debt consolidation services firm who manage a monthly payment for the creditors charging a fee or commission from the debtor.

Debt Consolidation: 

This is a solution for people to start taking action towards resolving the debt. The process requires a lot of research and study on each case and the decision which option to adopt is a critical one. The choice between whether to take a loan and repay the loan at once or to pay monthly to debt consolidation service to pay the creditors by charging a commission is difficult. The first option entails that previous debt is paid at once but there is another debt of a loan which includes interests and is equivalent to any other debt. While the second option is processed within the available resources, there is quite a bit of money that is paid extra as the commission of the debt consolidation services.

Debt Settlement:

This solution is more focused on resolving the debt problems in a shorter time period. The process is shortened because both parties involved wish to waiver a part of the debt so that repayment can be done sooner. It has been argued mostly that it is loss situation for the creditors but has been researched to realize that in practical terms it is not a loss situation. Since the creditors get the money in less amount of time, the lost amount can be recovered by reinvestment. As for the debtor, there are usually no extra debts involved and repayment is made within the resources available to them. There are a lot of debt settlement firms who help in this process and charge a onetime fee from both the creditor as well as debtor.

So, it is difficult to decide which option is better in generalized version; debt consolidation or debt settlement. The choice depends upon the circumstances of the case and the debtor and acceptance of creditor. But it can easily said that both options help resolve the issue of debt and should be considered before a decision is made about one’s financial crisis.

Debt Relief: Ways to be free from debt

Debt is not something that anyone is ever proud about. It hits a person’s ego and confidence every single time when think of the debt that owe or when mentioned to them. Debt induces to increase stress, decreases self-confidence and plants seeds of self-doubt. It does not help either that society always looks down upon people ridden with debt no matter what kind. So, why is it that the majority of people still are debt ridden?

Thus, we discuss the ways by which we can keep our debt free under normal circumstances. There are always exceptions when people get debt ridden due to being in dire situations. So, besides such exceptions we take seven simple steps in life, there is a huge possibility we would be debt relief.

1. Focus on needs rather than desires: It is important that we understand our resources and needs and act accordingly. The needs should be our priority and the focus should be on fulfilling them and living with the needful. The desires in life should never become priority especially in the lack of resources to accomplish them.
2. Use cash for the majority of task: When we use cash for activities like shopping and buying gas for cars, the knowledge of the exact amount of money left helps keep us in check from overspending.
3. Managing activities by own: It helps a lot and also enhances skills and knowledge to perform activities by ourselves. It helps save from paying other for the same.
4. Minimum use of credit cards: Credit cards makes it difficult to restrict ourselves from being extravagant. So, their usage should be kept to a minimum of emergencies.
5. Evaluate finances regularly: It is always advised to regularly evaluate the financial situation. This gives us the clear image of our earning and spending to make any changes needed.
6. Think about debt before taking it: People fall prey to the flashy promotions from companies who charge enormous amounts of hidden costs to help them with debt relief after introducing them to the vicious cycle in the first place.

Everyone knows the ill effects, still there are individuals who everyday apply for all sorts of loans, take mortgage to buy houses and use credit cards. The answers to these questions simply lie in ignorance and unrealised until debt relief is needed. Most people do not realise that some things that are part of their regular life actually put them in debt of banks and financial bodies.

Mortgages that got a debt relief won’t get hit with tax rate increase.

Extension of Mortgage Forgiveness Debt Relief Act will prevent mortgage modification or short sale as being treated as taxable income.

Till now Ohio had in writing that home owners that saved money from debt relief, a short sale, or loan modification on their mortgage would have to pay for it dearly on their taxes. Save one spot and pay in another right?

The Mortgage Forgiveness Tax Relief Act, cosponsored by Brown, would extend relief originally passed in the Mortgage Forgiveness Debt Relief Act of 2007. The legislation allows homeowners to exclude from annual, reportable income the discharge of mortgage debt owed on their homes. Individuals who receive assistance through the Home Affordable Modification Program (HAMP), Ohio’s Save the Dream Program, or other private agreements with financial institutions to save their home from foreclosure may now face additional tax consequences if the law is not extended.

you can read more here, but there isn't a point. http://www.norwalkreflector.com/article/4337346

Don’t celebrate yet, even though U.S. jobs recovery is on the rise...

Labor Department released its March employment report Friday, which showed businesses added 192,000 jobs and the unemployment rate was unchanged at 6.7%.

What does this mean? What it doesn't mean is things are looking great (just yet). You need to understand that unemployment remains but the working-age population has grown by 15million since 2008. So 6.7% now is worse then 7% back in 2008.

The unemployment rate stayed at 6.7% despite a surge in job growth because there were about 500,000 more unemployed people looking for jobs. Better job prospects drew discouraged workers back into the hunt.

College Students lobby for Debt Relief in Pennsylvania

debt relief is a huge problem. Everything from credit card debt to medical debt. And something most people don't even think about. Student debt. Even students need debt relief - or, according to some, only the middle class does.

While we can't take this debt relief article too seriously i do have to point out something.

College students from across Pennsylvania are heading to Harrisburg today, to lobby lawmakers on debt relief for middle-income college students.

The bus pulled out before the sun came up, carrying about 40 Widener students heading to Harrisburg where they’ll join up with undergrads from several other colleges and universities across Pennsylvania and lobby lawmakers on supporting two bills aimed at easing college debt on middle income students

Did i read that correctly? for "middle-income college students" ? really? read more here: http://philadelphia.cbslocal.com/2014/04/01/widener-students-in-harrisburg-to-lobby-for-college-debt-relief/

Debt Relief Companies Violate the Fair Debt Collections act?

Huffington Post has a great article on Debt Relief Companies and the Fair Debt Collections Act.

from the article:

This issue about out of SOL debt and debt relief companies is important for consumers to be aware of and informed about so they do not rush to settle or repay debt that is out of the Statute of Limitations (SOL) or time barred.

And the statute of limitations isn't so clear cut that anyone on the street can provide correct advice. It would be best to get the opinion of an attorney who is licensed in the state the consumer lives in to make sure which state statute applies in a specific and particular situation.

Consumers need appropriate disclosures and awareness before enrolling debt in a debt relief program so they can make an informed decision about how they really want to tackle the out of SOL debt. And this should be equally important for the debt relief company to be aware of as well. Out of SOL debt should be the lowest priority on repayment and set aside till all other debts are tackled first.

The biggest problem for credit counseling and debt settlement companies seems to be in blindly assisting the consumer to repay debt which would otherwise not be legally repayable. Or worse yet if the debt relief company represented to the consumer they debt was still legally repayable when it was not. That's where it seems a debt relief company could brush up against the same FDCPA problem the debt collector did.

Getting Credit Card Debt help

Selecting credit card debt is surely a critical choice and also you have a few points to consider previous to affixing your signature to your current title. If you decide to consolidate your credit debt with a financial institution, you may need to apply for any secured loan against a great asset that will serve as collateral, most commonly your property. We’ll end up being frank. The idea of you applying for a protected loan and making use of your home while collateral, to consolidate credit debt, is an exceptionally risky determination with evident downsides — this recent turmoil from the housing and financial marketplaces makes this particular evident. Would like to consolidate your credit debt with a for-profit debt consolidation reduction company, possibly you have to make application for an unguaranteed loan, in which you don't need to put up collateral.

In this case, you are going to be signing your current name a great unsecured mortgage to benefit your other credit debt. This style of unsecured debt consolidation reduction loan is incredibly rare in addition to equally dangerous. The level of trusted organizations offering debt consolidation reduction loan plans without collateral are hard to find. They offer a risk-free method to consolidate credit card debt payments. If you receive your free credit rating counseling treatment, ask about how precisely to consolidate your repayments into a new Debt Administration Plan. In case you qualify, you're able to pay one monthly installment to your credit card banks and you benefit from the incentives they will offer a person without putting your home or different assets vulnerable.

Credit Counseling – The Band-Aid over the open wound

When you have kids – have anyone ever wondered “when are they planning to teach my kids banking? ” If you’re a young adult – or even wondered “when am I going to obtain a lesson on credit and the way to get it and make it help me? ” Well in both of the people situations the answer would be the same – AFTER you/your children enter debt and start wanting to dig out. Unfortunately, in society today we wonder how we got ourselves in this specific hole ($853. 6 billion in unsecured debt) but we now have yet decided to alter our process and teach kids how to stay out of it from the start. Credit counseling should end up being provided to 6th-12th graders inside a school setting. We make second language a mandatory class, but none of that matters if our little ones grow up in any debthole that normally takes 10+ years to leave, and that’s if these are lucky. It is individual that is largely kept in secret and soon you try to get your first apartment and a co-signer is needed. Then the flood gates open and the advice that is given may or may not be the right advice. The first advice comes in letters with their name on the front telling them these are approved for $2000! That sounds great – however they forgot to read the manual or didn’t understand it, but went for it anyway. I mean, I need credit founded and I get $2000 in the act. 5 years from given that same person will be understanding right away the damaging or positive impacts of their first little card – depending on what advice they obtained and took. Credit Counseling is often a program used after the simple fact, after you already know how and why you found myself in debt; hence the Band-Aid on the open wound – nevertheless wouldn’t that be great if it had been a proactive program required Prior to a fact as a elimination? As our country increases and changes and our unsecured debt raises, maybe prevention programs will likely be developed and used in your school systems. But since they will be not and there is often a 75% chance you will be in debt right now, there is a very quick, affordable, and safe solution to getting away from debt. It has to be done through a reputable debt consolidation company. Do your investigation, like in many sectors no two companies include the same. Some have been accomplishing this successfully with honesty for several years; they have proof and ratings to copy their reputation. It is a good program that can finally get you from the hole you are throughout. People join this plan from all walks of life, but the very important factor they all have in common is they decided they'd enough.

Fake Loan Modification Companies Out There And Fake Press Releases

From Loan Modification News site loan-deals.com

One such site, About California Loan Modification (dot) com –(sorry for not making it a link , don’t care to generate traffic for these guys) had a press release earlier on a free site pr-insider.com. The press release talks about a “Mr. A” and quotes him as complementing the work of said loan modification lawyer for taking a “gun to a gun fight” and saving him “well over $100,000”

Skip A Mortgage Payment

Recently i read a bad article about not skipping payments and just calling your lender to get a loan modification. The problem here is lenders will flat out say that you aren't struggling because you haven't missed a payment - so why should they help you. No i am not the governor of New York, No i dont think loan modifications are a scam..

With ample talk of loan modifications, underwater mortgages and rampant home foreclosures -- and with over six-million jobs lost during the past 17 months, according to the U.S. Department of Labor, the temptation to skip a mortgage payment may never be higher.

Why? If you’re unemployed, or suffered a health scare that’s swallowed up your cash, taking a one-month break from your mortgage payment responsibilities might give you some breathing room.

And, true enough, skipping one mortgage payment won’t get you thrown out of your house. Some banks, like JP Morgan Chase (Stock Quote: JPM) and Bank of America (Stock Quote: BOA), are even making mortgage loan “freezes” part of their loan modification programs

For Loan Modification News be sure to visit our sister site loan-deals.com

Court hears warnings about proposed foreclosure aid regulations

Lawyers and residents warned the state Supreme Court today that banks and mortgage loan companies might try to circumvent a new state law designed to reduce the number of foreclosures in Nevada.

One said the companies will send “sitters” to mandatory mediation hearings who do not have any authority to offer loan modifications to home buyers facing foreclosure.

Another said it will be extremely difficult to find out who owns the loan on which a home buyer is in default and facing foreclosure.

Reno attorney Robert Hager said mortgage companies typically make loans on money they receive from investors.

With the billions of federal bailout dollars given to banks over the last year, Hager contended it might be the American taxpayers who own the loan on mortgages now in default.

“No one can tell me who owns my loan,” said Reno resident Lauren Kay, who said her home is in default. “Countrywide says it is only the servicer of the loan.”

Under tentative rules developed by a Supreme Court task force, a home buyer who receives a default notice after July 1 — the law's effective date — could request a hearing before a court-appointed mediator to see if the lender will agree to new loan arrangements.

Both home buyers and lenders would be required to submit loan modification proposals to the mediator.

Justices made little comment on the concerns raised today, but they could change the regulations based on what they heard.

The proposed regulations were designed to battle the foreclosure epidemic facing Nevada home buyers. They received their first public hearing today.

Another hearing will be held at noon Monday in court on the 17th floor of the Regional Justice Center in Las Vegas.

The rules are designed to put into effect Assembly Bill 149. The legislation, drawn up by Assembly Speaker Barbara Buckley, D-Las Vegas, passed overwhelmingly in the Legislature and was signed into law by Gov. Jim Gibbons.

Final rules will be adopted June 29 by the Supreme Court.

Hearings at which home buyers and lenders will meet with mediators and try to work out solutions will begin in August.

Chief Justice Jim Hardesty said he expects 1,200 to 1,500 home buyers will request the mediation hearings every month.

Buckley estimated the new law could save 17,700 homes that otherwise would have been lost to foreclosure.

For Loan Modification help
But she emphasized from the beginning that the law would help only those who still have the means to pay a mortgage.

Nevada leads the nation in its foreclosure rate. Last year, 77,000 people lost their homes to foreclosure in the state.

The proposed rules also would require home buyers to prepare financial statements, including stating exactly what they can afford to pay on a mortgage.

At the same time, lenders would have to release appraisals showing the current worth of the home on which they seek to foreclose and estimates of what the home would sell for in a “short sale.”

Short sales are the way many lenders now dispose of the glut of foreclosed homes. Prospective buyers submit bids for a property that generally are far short of the amount of the existing loan.

Lenders decide whether to accept those bids.

Justice Mark Gibbons today questioned why lenders do not offer “short financing” to existing home buyers facing foreclosure, seeing they already agree to short sales.

Gibbons said lenders should be aware that a home worth $300,000 two years ago might be worth only $150,000 today and be willing to make loan modifications based on the new value.

With the required information from the lender and the buyer, the mediator then can strive to see if the two sides can agree to loan changes that would keep the buyer in the home.

Under the law, however, lenders are not required to agree to new loan arrangements.

More than 350 lawyers, former judges and trained mediators already have applied to serve as mediators. They will be paid a maximum of $400, half of which will be paid by the home buyer and half by the lender.

Home Loan Scams

LOS ANGELES - For months, Antonio Villagra worried that his Granada Hills home would be taken away. "I missed one payment," said Villagra, "and I had the money. But they told me for the modification I had to be behind one month to qualify."

Villagra had never been late on a payment, but wanted to modify his loan to get a better interest rate. Just after his wife passed away, he trusted a company that called him on the phone.

"The first thing they asked me was 'you have to bring in the check for two-thousand-two-hundred dollars to start it," he said. Villagra brought in the check, but the company, Prominent Financial Solutions, never got him a loan modification, and when employees stopped returning his calls, he looked for help.

Villagra went to Maritza Gutierrez and her staff at the County of Los Angeles Department of Consumer Affairs Real Estate Fraud and Information Program, where they got his money back, and got him the free help he needed.

"Obviously if the homeowner can't make a mortgage payment then they shouldn't," says Gutierrez. "But if they're telling them on purpose not to make a mortgage payment, then they're in violation of all these offers the government is trying to give homeowners."

Gutierrez says most of the homeowners who call her feel as if it's almost too late.

"Do they show up at your office?" asked news anchor Emmett Miller. "They show up at my office," answered Maritza, "and they're crying. And they're barely making it to eat. And nonetheless to pay 5-thousand dollars to a company that didn't do anything for them!"

Gutierrez says there is free help that her office can recommend. Investigator Gutierrez and her team got Antonio Villagra's money back, but we wondered if the company Prominent Financial Solutions was still doing business.

We went to Bellflower to find out, but their office was now a gym. But the owner for the gym, who used to work for Prominent Financial Solutions, told us we could get a loan modification two door down at the lawyer's office there. By phone, the attorney who runs the office, Wilo Nunez, said he had not heard of Prominent Financial Solutions, but several of his employees told us people who used to work for Prominent were now employed by attorney Nunez.

On hidden camera, one employee said: "Well we used to be Prominent but it's all been switched over to the law office just to make everything a little bit more certified as far as modifications go."

Also on hidden camera, an employee gave us the same advice as Prominent Financial had told Antonio Villagra: to fall behind in your mortgage payments to help you get a loan modification.

Informed about that statement, attorney Nunez said the employee may have said something unethical and could be fired for it, but he did not ask us who the employee was.

We also spoke to real estate attorney Seth Hicks of Greene, Fidler, Chaplan and Hicks LLP.

"We've had many horror stories," said Hicks. "In fact, I'd say one out of 4 calls that we get are from borrowers who have previously gone to loan modification companies and been completely unattended to and unable to meet loan modification."

Hicks says homeowners should be wary of unreputable loan modification companies and lawyers, but also says loan documents are so complicated, most consumers can't understand them well enough to represent themselves.

"An unrepresented borrower is like a sitting duck to a bank," says Hicks. His client "Terry" agrees. He says he has peace of mind after hiring Hicks to try to prevent a foreclosure on his house.

"You're talking about the number one investment in your life probably, your home," says Terry. "So it's worth it to seek the counsel of an attorney, and not try to do it on your own."

Two Las Vegas men indicted in foreclosure rescue scam

Two Las Vegas men have been indicted on felony counts of theft from a person 60 years or older and theft under a foreclosure rescue scam, Attorney General Catherine Cortez Masto said today.

William Vargas and Michael Sinclair were indicted on one count of felony theft from a person 60 years or older and four felony counts of theft for allegedly operating a foreclosure rescue scam under the business name of Federal Housing Aid.

The indictment alleges that Vargas and Sinclair operated Federal Housing Aid since February 2007, offering loan modification services to assist people in avoiding foreclosure on their homes.

The pair allegedly charged people between $899 and $1,500 in upfront fees and offered a 100 percent money-back guarantee, claiming their company would refund the money if foreclosure could not be stopped.

The company is alleged to have solicited people in Nevada from a call center in the Philippines, the indictment said. After paying for services, Vargas and Sinclair failed to provide services people had paid for, and failed to refund payments as promised in their advertisements.

Michael Sinclair is believed to be in the Philippines.

Collecting fees before services are provided for loan modification is a violation of Nevada law, Nevada Revised Statute 645D.400, Masto said. The state alleges that Vargas and Sinclair failed to perform foreclosure rescue services and failed to refund money as promised.

The case was filed by prosecutors assigned to the attorney general's mortgage fraud task force, created by Masto in early 2008 to address mortgage fraud scams throughout the state.

A district court arraignment has been scheduled for William Vargas at 9 a.m. June 23 in Las Vegas District Court Dept. 17.

"Any individual who believes they can take advantage of the dire foreclosure market in the state of Nevada needs to know they will be identified and prosecuted," Masto said. "Victimizing individuals who are desperately seeking a way to keep their property is the height of greed and cruelty."

Las Vegas is leading the nation in foreclosures.

Feds Going After Loan Modification Companies

Mortgage fraud has increased so dramatically in the San Joaquin Valley that a task force of federal, state and local agencies has been formed to fight back.

The FBI, IRS, Secret Service, Department of Housing and district attorneys in Fresno, Tulare and other counties are among those involved. Their assignment: investigate mortgage fraud and foreclosure-rescue scams connected to the real estate boom and the bust that followed.

The FBI has helped set up 65 similar groups to combat a nationwide epidemic of mortgage fraud blamed for $4 billion to $6 billion in losses, according to estimates.

While the FBI helps organize such task forces fairly regularly, usually they're set up in response to violent crimes. The fresh focus on mortgage fraud reflects how prevalent it has become, said Steve Dupre, an FBI spokesman in Sacramento.

Last year, the number of suspected mortgage-fraud cases in the United States topped 63,000. In only the first two months of 2009, the FBI received 28,873 reports of suspected mortgage fraud and had more than 2,000 cases under investigation.

Last year, 734 cases were opened nationwide. That compares with 295 in 2003.

The Valley task force efforts are in addition to cases that other agencies, such as Fresno police and Fresno County District Attorney's Office, are investigating.

Loan Modification Application- Documents You Will Need

If you are struggling to pay your monthly mortgage payments each month you should strongly consider applying for a loan modification with your lender. A loan modification changes the terms of your loan to make your monthly payments more affordable. This can be accomplished through lowering the interest rate, extending the payment schedule on the loan, or forgiveness of part of the principle. A loan modification can help you get your finances back in order and help save you from losing your home in foreclosure.

To apply for a loan modification you will need to fill out a loan modification application. There are quite a few documents and pieces of information you will need to supply your lender. It is very important to be accurate and thorough in providing your lender with your financial information and to present a compelling case for why you are a good candidate for a loan modification. Here is a list of documents and items you will need to help you get started on your loan modification application.

Loan Modification Application

- Borrower Information Sheet. This is the part of your loan modification application that contains your basic personal information such as name, address and social security number.

- Hardship Letter. You need to write a brief, but compelling hardship letter stating the nature of your hardship and why you are not able to meet your monthly payments. Examples of acceptable hardships are loss or reduction of income, divorce or death in the family, medical bills, and job relocation.

- Financial Statement. This lists your income and assets and presents your case for why you cannot meet your current payments but at the same time shows how you will be able to meet revised payments under a loan modification agreement.

Supporting Documents

- A cover letter that explains why you are submitting these supporting documents. Also provide a list of the all documents.

- Copies of your federal income tax returns for the last two years

- Copies of your W-2 forms for the last two years

- Copies of your pay stubs for the last two months

- Copy of your latest mortgage statement

- Copy of your latest property tax statement, if your property taxes are not in escrow

- Supporting documents, such as hospital bills, death certificate or divorce papers.

- Your last two bank statements

- Copy of your homeowner's insurance policy

- Copies of any letters from credit counselors or financial advisors that demonstrates that you are attempting to correct your financial situation.

It is very important that you submit a compelling, accurate and thorough loan modification application. Use this checklist to gather your information and present a compelling case for your loan modification in your hardship letter and financial statement.

How does owning multiple properties impact loan modification success?

Loan modifications are uncharted territory and as a result there is no map or guidelines that can guarantee modification success. Because lender policies change daily this poses a number of obstacles for the borrower. However, one obstacle that continues to impede loan modification success is when the borrower owns multiple properties. There are a number of loan modification programs being introduced by the Obama administration, however, they only apply to those borrowers who have one property that they are occupying. According to the lenders borrowers with multiple properties have the resources to earn a rental income or sell the property. Unfortunately, many borrowers are stuck with a mortgage on a rental property that is larger than what they receive in rental income. Sadly to say loan modifications are a rarity for borrowers with multiple properties.

Loan Modification Scam News Site!

It's actually gotten that bad that the Loan Modification News site www.loan-deals.com has actually started a loan modification scam news section!! (I am not kidding)

For more information click here: Loan Modification News Scams

Hardship Loan Modifications

Millions of homeowners are struggling to pay their monthly mortgage payments and risk losing their homes in foreclosure. A bad economy, difficult mortgage loan terms, and decreasing home values have all contributed to this bad situation. The federal government and lenders have stepped in to try to provide solutions. Foreclosure is not only bad for borrowers but lenders as well. The foreclosure process is very costly for lenders and it is hard to recover the amount owed on the loan through a foreclosure auction or short sale. A hardship loan modification may be offered to borrowers who are facing a financial or personal hardship to avoid foreclosure for both the borrower and lender.

A hardship loan modification involves modifying the loan terms to make the payments lower. This is designed to help borrowers facing hardship the ability to still make their monthly mortgage obligations with reduced payments. This can be accomplished through extending the length of the loan, lowering the interest rate, changing the loan from an adjustable rate mortgage (ARM) to a fixed rate mortgage, or in some cases even some principal forgiveness.

A borrower who is seeking a loan modification must demonstrate that they are suffering from a hardship that makes it difficult for them to make their monthly mortgage payments. There are several hardship situations that a lender might find acceptable. Some of these include loss of a job, a reduction in income, divorce or death in the family, military service, a major illness or high medical costs, as well as job relocation. There could be other situations that qualify as well. Each individual borrower's situation is different, and each lender has different criteria that they use to determine hardship cases.

The way a borrower demonstrates their hardship is through writing a hardship letter that is part of the loan modification application. The borrower needs to write a brief but compelling letter that explains their hardship and their willingness to correct their situation. A borrower should be honest and to the point in the letter and provide back up documents if necessary such as divorce papers, copies of medical bills, or any other documents which will bolster their hardship case.

The federal government has responded to these tough economic times and is strongly encouraging lenders to offer loan modificationsto homeowners facing hardship situations. In fact the federal government has recently rolled out the $75 billion Homeowner Affordability and Stability program. Under this program the federal government will actually pay lenders $1000 per loan modification they offer. If you are a struggling homeowner facing a hardship, a loan modification may be just what you need to help get you back on track and save your home from foreclosure.

ARM Mortgage Loan Modifications

Adjustable mortgage loans (ARMs) were very popular several years ago during the housing boom because they provided the borrower with low payments. Many of these mortgages were also sub prime mortgages, so they were easy to qualify for. The idea was that a borrower could always refinance later if interest rates rose by taking advantage of the equity they had built up in the home. However, the housing boom also saw an increase in construction and there became a glut of housing on the market. Property values started to drop and many borrowers with ARMs found themselves in the situation of owing more on their home loans than the value of the house.

The sub prime market began to fall apart and credit tightened. This left many borrowers unable to refinance their mortgages and with interest rates that were resetting at higher interest rates. Many borrowers could not afford the higher payments and foreclosures soared at an alarming rate.

Lenders and the federal government have responded to this crisis and loan modifications are now an option for many holding an adjustable rate mortgage. A loan modification changes the terms of the loan so that the monthly payments are more affordable. This can be accomplished through lowering the interest rate, lengthening the payment term on the loan, partial principal forgiveness or changing a loan from an ARM to a fixed rate mortgage.

The federal government is encouraging lenders to offer loan modifications, particularly ARM mortgage loan modifications. The new Homeowner Affordability and Stability program even gives lenders a $1000 per loan modification to provide incentives for lenders to help troubled borrowers to help stabilize the mortgage industry and financial markets.

If you are a homeowner with an ARM mortgage loan struggling to meet your monthly payments, you may qualify for a loan modification. You can check with your lender to see what the eligibility requirements are and what the application process is. You may be eligible to change your loan from an adjustable rate mortgage to a fixed rate. You may also be eligible for an interest rate reduction or even some principal forgiveness if you are upside down (owe more on your loan than the value of your house) on your loan. Before submitting a loan modification application, make sure you become familiar with the loan modification process and your lender's requirements. A loan modification can help save your home from foreclosure and save you thousands of dollars on your mortgage so it is definitely something to consider if you are struggling to meet your monthly mortgage payments.