How Loan Modification is Helpful to Avoid Foreclosure?

Before the foreclosure hits you, you must be aware of the different ways you can go for avoiding it. An action taken earlier before you are late with your loan repayment would be better than acting later and the loan modification is the first option you can go for to keep the foreclosure at bay. In this write-up, we are going to tell you that what is loan modification and how it can help to avoid foreclosure in Houston.

So, What is Loan Modification?

Loan Modification is an agreement between the lender and the homeowner in which the terms of the loan are modified to lower the monthly loan payment and make it affordable for the borrower. The mortgage can be modified by extending the loan term or by lowering the interest rate. And in the case, the homeowner is already in default, the overdue mortgage payments would be added to the principal. Depending on the terms of the loan modification, the overdue payments can be paid over the entire loan term or in a single payment at the end of the loan term.  

Options with the Loan Modification

The main aim of the loan modification is reducing the monthly payment amount and it can be done in some different ways. Here are the available options.  

• Extending the loan term: In this, the loan term is extended so that the homeowners can get more time to pay the loan and as a result of this expansion, the monthly payment amount is reduced. However, the extended period should not be more than the original loan term.

• Reducing the interest rate: The interest rate is reduced for the remaining loan period and this also reduces the monthly payment amount. By making those payments, the homeowners can easily avoid foreclosure in Houston.

• Reducing the principal: In this, the principal of the loan is reduced and it is mainly done for the houses which are depreciated that makes the homeowners owe more than the home's market's value.

• Step rate: In this option, the step rate is reduced temporarily and then is brought back to the original rate gradually. This allows the homeowners get back on their feet and resume payments.

How does it Help?

All the above-mentioned options explain that how each of them makes the loan's monthly payment affordable for the homeowners. They can talk to their lender, explain them their situation, show the proof of monthly income to make sure that the hard time has been over. And then, they can make their lender to qualify them for loan modification according to one of the four options that will be suitable for both the parties. In the case, you are not aware of the loan modification procedure, you can seek the help from an experienced foreclosure agent in Houston.  

" However, don't wait until you default on your mortgage payment; it would be better to apply for the loan modification process earlier. As long as you are able to prove that you may be behind on your payments, your lender would consider you for the loan modification.  "

Strategies to Stop Foreclosure the Last Minute

If you have got a mortgage, there is no surety that when you would need to face the situation of foreclosure. Though no one wants to face this situation, but the exigencies like loss of job, unexpected illness, uncontrolled expenditure and more can make you stand at the point where you see only the foreclosure. If you have received the notice for foreclosure and are sure that you would not be able to bring your mortgage payments up-to-date, you are definitely going to get panicked. But, let's tell you that still, there is a hope and you can stop the foreclosure. Real estate agents use a number of ways to stop foreclosure in Houston that you can follow to come out of the situation.

Below are the strategies that would help you stop foreclosure even at the last minute. It is necessary for you to know these strategies even if there are no chances of the foreclosure because the emergency can arrive anytime.

• Loan modification

It is the option that you can go for at the last minute. It is also known as refinancing. Actually, when you miss one or more payments and there is the fear of foreclosure you can apply for the loan modification. In this, the amount you owe on your mortgage is modified into a new loan with some amendments, like the amount of the monthly payment or the interest rate can be reduced.
Loan modification is a good option if you are clear that you can bring your finances back on the track and would be able to make the payments on time. The process of loan modification is easy and it will keep the foreclosure stopped until you miss your loan payments again.   

• File for Bankruptcy

Filing a Bankruptcy is the most preferred option when it comes to stopping the foreclosure at last minute. Upon filing a bankruptcy, the court will put your foreclosure on hold by issuing orders of the automatic stay. According to the bankruptcy laws, all the attempts made to collect the debts are halted once the bankruptcy is filed. And as foreclosure is the process for obtaining debts, it is put on hold if the bankruptcy is filed. 

However, you lender may file a motion to lift the automatic stay but even if it is granted, the foreclosure will be delayed for a few months. This will give you the time to go for other possible options. Also, you need to be clear that which bankruptcy you should file. If you want to save your house, the Chapter 13 bankruptcy would help you with that and if you just want some more time for arranging funds, the Chapter 7 bankruptcy would be the right option. 

• File a Lawsuit

It is required in a majority of the states that the foreclosure should be processed through the court. In the case, your lender is going with the foreclosure without following the laws or without going through the court, you can file a lawsuit against him. In the case your lender is not able to provide you the proof that he holds a promissory note on your mortgage, you can file a lawsuit against him. However, you would need a proof that your lender is at fault. 

"Last but not least, if due to any reason, you are not able to stop the foreclosure by the above-given ways and are looking for help, you can contact Caroline Allison for Houston foreclosure defense. She is an experienced foreclosure agent who uses the best ways to help the homeowners deal with the foreclosure. "