Posts Tagged ‘hardship letter’

Loan modifications are becoming a popular alternative to foreclosure.  A loan modification, sometimes called a workout, is where the lender changes the terms of the loan, such as the interest rate, the amortization type, or even the principal balance (dropping  the principal balance is still not common but it does happen). The idea is by changing the terms of the loan to lower the payments the borrower can continue to make payments on the loan and prevents loan from becoming non performing.

Here’s what I have heard so far on loan modifications:

  • They are not working with investors
  • They won’t talk to you unless you are behind on your payments
  • The customer service folks won’t help you, you have to talk to the actual decision makers

Of course this is all hearsay.  However I do believe there is some truth to the buzz I’m hearing.  Navigating the bank hierarchy to get agreement on a loan modification is hard.  That is why there are a number of companies that will help you do just that.

According, to the Loan Modification Handbook the first step is to draw up a hardship letter and a budget. What can you afford? And why do you need a loan modification? Banks are numbers businesses and if you can show them that the new numbers make sense you might have a good chance of getting a loan modification.

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