Avoiding Foreclosure With A Loan Modification

A loan modification is the best way to stay in your house, not to sell it and avoid foreclosure. This involves a lender modifying your payments so that you can afford to keep making them. The Loan modification could include lowering the interest rate so that the payment is lower, or even adjusting the principle balance on the loan.

For more legal information about avoiding foreclosure with a loan modification go to Law Summary of Foreclosure in Texas  or  to Texas Legislation Online.

Advantages and Disadvantages

The advantage of a loan modification is that it can make an un-affordable loan affordable.

The disadvantage of a loan modification is that, based on our observations, most of the time the homeowner pursues these, they are ultimately not approved, or almost certainly not approved in a way in which it is helpful enough for the homeowner to stay in the home. In other words, most of the time it does not work and the result is foreclosure. 

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    In a typical scenario, a homeowner will hire an expert to negotiate the loan modification. Please carefully research any company that offers this service for a fee. Usually the homeowner will be told to stop making payments during the negotiation. At this point the lender will tell the homeowner that a modification is being considered. Unfortunately, most of the time the modification is ultimately denied (just before a foreclosure) and the homeowner is not able to make up all of the late payments and significant interest, penalties, and legal fees, and thus the result is a foreclosure. 

    The types of modifications that have a higher success rate involve converting an adjustable rate loan to a fixed rate loan or pushing out the interest rate adjustment for a couple of years. The types of modifications that have a lower success rate involve reducing the principal balance on the loan. Because many homes are so far underwater that a workable loan modification are usually not achieved.

    Loan Modifications rarely work. A LM, is an option for you to keep your house, if it is denied and you need to sell your house as-is, we can make you a fair offer following the 5 steps process to buy houses, so you can start fresh, with no debt, and if possible, with money in your pocket. 

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