Recently, the news reported that there are over 1 million people in default on their home loans. This is not surprising because we have been seeing this happen over the last four years. There is still a whole bunch of these subprime loans that are ready to come due. Some people are expecting 2012 to be a terrible year for the real estate market. Since the real estate market melted down in 2007 there has been a whole new industry created to modify mortgages to help stop foreclosure on individuals homes that cannot afford them. Many Americans come to the conclusion that they will have to give up their home if they can modify the loan and file bankruptcy. These loan mod companies make it sound simple, while in fact it's a lot more complicated than it seems. People are willing to try anything to avoid filing bankruptcy.
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If you're kicking around the idea of filing bankruptcy and/or a loan modification to stop foreclosure there are a few things to think about. When applying for a loan modification, find a reputable company that has good reviews. If at all possible, ask your bankruptcy attorney if they could point you in the right direction of someone they have worked with.
When you're in any kind of legal process make sure you get everything in writing. If they won't put it in writing its best just assume that they never said it. Legally, to enforce any changes to the contract, like your mortgage, it has to be in writing. Some salespeople will tell you anything to get the deal or just get you off their back. Next, if they do put it in writing, be very diligent keeping everything they send you. Set up some kind of file system so it will be easy to refer back to if necessary. Many times, it seems that papers get lost because of the large volume of files they are processing.
If the loan modification company says that your foreclosure is now canceled, get it in writing. If it's not in writing, it probably never happened. If your file slips through the cracks and you assume that your foreclosure has been stopped, finding out on the court ordered sale date might be too late to save the property. Many people think just because they have filed the papers for a loan modification, they can stop making their payments and the foreclosure will be stopped. Don't believe anything until you get the loan mod in writing. If you're in the process of filing bankruptcy, take all your documentation to your bankruptcy attorney for review. This will give you a leg up of how the process is going.
While a loan modification could provide relief for individuals to save their home only about 5% of these go through. Most people end up filing for bankruptcy anyways. Depending on your income level, sometimes a Chapter 13 bankruptcy will allow the debtor to negotiate something with the lender much easier than going through the loan mod process. If you're having deep financial troubles, consult with a bankruptcy attorney to get your different options. Never leave your family's financial future up to some salesmen trying to get a commission for a loan modification. Some people going through the process destroy their credit because of all the late pays they accumulate during this time frame. When it comes to financial matters always be proactive and don't bury your head in the sand, thinking it will go away.
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