If you know you're facing the impending threat of foreclosure from your bank, you could seek a mortgage loan modification agreement. This could provide you with some foreclosure relief, as well as giving you an option to get back on your feet financially.
A mortgage loan modification is simply a negotiation with your bank to figure out a way to reduce your loan repayments, lower your interest rate, or even even extend the loan term. The point of these negotiations is to find a way to make your financial situation easier to cope with while you sort out how to get your finances back in order.
You will need to check whether you qualify for a mortgage loan modification. Not every home owner who is struggling to keep up with repayment obligations will automatically qualify for this kind of contractual termination.
Yet if you know that foreclosure proceedings from your bank are imminent, you can receive immediate foreclosure relief by applying for a mortgage loan modification.
How Does Loan Modification Stop Foreclosure?
If you can successfully negotiate a loan modification with your bank or lender, they are contractually obligated to stop foreclosure proceedings. This is because, if you can successfully alter the original contract conditions laid out in your mortgage contract, the bank is then legally obliged to allow you to remain living in your home to see if you'll live up to your end of the new negotiated contract agreements.
How Do I Apply for a Loan Modification?
There are plenty of mortgage loan modification companies available who will happily negotiate new payments plans, reduced payments or lowered interest rates for you. However, it's also very possible to apply for a modification to your mortgage agreement on your own.
If you intend to apply for this kind of modification by yourself, you will need to draft a letter outlining precisely how modifying your mortgage will help you financial situation.
There are plenty of resources available online outlining how to draft a loan modification letter to your bank. Use one of these templates to create a letter asking your bank to consider modifying some of the original terms in your own mortgage contract.
Remember to include specifics about your own financial situation, including why your financial position is so precarious and why a modification will help you to regain control of your financial situation.
Your letter should include details of your new income and why it's changed. You will also need to include accurate listings showing your expenses. When the bank is reviewing your application, they will consider whether or not reducing your mortgage repayments will actually help your financial situation or not.
Make it very clear that you foresee your current unrestricted financial situation as being only temporary. You should also highlight that your current financial hardship is only temporary and that you're doing everything in your power to amend it.
This will help your bank to understand that helping you out with modifying your repayment amounts, or extending your loan term, or reducing your interest rates, is the right thing to do in order to get you back on your feet again financially.