Loan Modifications - The Trial Period

The trial period for loan modifications is creating a stir for many homeowners. Could it just be another way for the administration and lenders from really helping out the poor borrowers? The trial period can be three months or four months, depending on whether you are already in default or current on your existing loan.
What are some of the requirements of the loan modification trial period? In the simplest example, the requirement is to make the loan payment. But, in other scenarios you will need to show that you have homeowners insurance and, of course, sign multiple documents.

Another requirement of a loan modification is to give accurate information about your income and expenses. The lender can decide to change your it if they find out that you were not completely accurate in providing this information. For example, if you've told the lender that your income is $5,000 / month, but in reality it's only $3,000 / month, they could re-do the loan modification and even start the foreclosure process immediately.

The administration is working to allow borrowers to earn "incentive payments" during the trial period. Say that you are successful during the three month trial period. You will accrue an additional incentive payment on your first month of your new loan modification.

What about my credit during a loan modification? This question has been asked over and over again. Thus far the administration has been short of answers on. It's pretty "complicated" as they try to say. The big servicer, Fannie Mae, thinks that if you were current before the trail period, you should not suffer any credit issues. However, nothing is set in stone and seems to only get "lip service."

Here is an interesting situation for loan modifications. The lender will not receive any payment from the government if the it is not completed. So, they are incented to make this happen as much as you. However, they are not required to complete the loan modification if you do not hold up your end of the bargain. Just make sure that the lender's obligations are spelled out in your agreement with them. Don't let them push you around!

Bear in mind that you are required to make all of your payments during your three month loan modification trial period. The lender may be able to handle a late payment, but all payments need to be made, otherwise you will be out of luck for further loan modification support.

As you can see, the process is not an easy one. It will require you to be diligent and work through the requirements set forth. If all else fails, write your congressman and senator for their support. They have some ability to make these organizations follow through on their commitments. I suggest also writing to the Department of Housing and Urban Development. All of these government officials and offices are responsible for helping ordinary citizens.

The time for action on your loan modification is now. Don't delay, because every day moves you closer to losing your home!

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