Banks, Lenders Can Be Source of Help When Home Loans Become too Expensive

A growing number of people are foreclosing on their home loans as the national economy continues its weak recovery. RealtyTrac.com, an online provider of foreclosure data, reported that the United States saw its greatest number of housing foreclosures ever in 2009, with 2.8 million properties receiving a foreclosure filing during the year. This is a grim record to set. If you’re struggling to pay your mortgage bills, and you’d rather not be a part of this year’s foreclosure statistics, you’ll need to take some important steps to avoid defaulting on your home loan.

Federal Help

The Obama administration recognized that U.S. homeowners were struggling to pay their home loans. That’s why in 2009 the administration launched the Home Affordable Modification Program. This program offers financial incentives to encourage mortgage lenders and banks to lower the monthly mortgage payments of struggling homeowners. Lenders can modify home loans in a number of ways: They can reduce the interest rates on these loans, restructure the terms of them or reduce their principal balance. Each option will provide homeowners with a reduced monthly mortgage payment. To qualify for the Home Affordable Modification Program, you’ll need a first mortgage that is equal to or less than $729,750. You must have taken this loan out on or before Jan. 1, 2009. And you must be having trouble paying your mortgage bills.

Call Your Mortgage Lender

If you are finding it difficult to make your monthly mortgage payments, immediately call your mortgage lender. Ask your lender if it is participating in the federal government’s loan modification program. Most lenders are. But even if yours isn’t, it can still choose to modify your loan at its own discretion. Tell your lender that you’re worried that you can no longer afford your monthly mortgage payments. Your lender will probably ask you to prove this: You do this by sending in copies of your monthly credit-card bills and other loan statements, plus copies of your savings and checking accounts, two most recent paychecks (if you’re still receiving them) and your latest federal income tax return. Your lender will look at these documents, plus your monthly mortgage payment, to determine if you truly are in difficult financial straits.

Work Out a Solution

If your lender determines that you are in need of a modification to your home loan, it’s time to agree on a solution that will lower your mortgage payment. Make sure that you settle on the solution that is best for you. Statistics say that the most successful modifications of home loans are those that involve a reduction in principal balance. Getting this, then, might be your primary goal.

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