Many homeowners across California are opting for loan modification to prevent home foreclosures. California witnesses around 80,000 to 90,000 foreclosure filings every month. According to new California law, a lender has to place comprehensive loan modification program that meets certain standards or has to give 90 days advance notice to homeowners before foreclosing.
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The loan modification program offered by the lender is required by law to meet particular criteria, including reducing the homeowner’s payment per month to less than 38% of their total annual income. Other options to prevent home foreclosures include extending the length of the loan or reducing interest rates for up to five years. The foreclosure process is exceedingly expensive for lenders. The average Californian home foreclosure will cost an approximate $60,000, with at least $4,000 or more from legal fees alone. Realistically, the complete total of legal fees with amount to nearly 25% of the loan.
For these costly reasons, California’s banks are seeking to avoid the foreclosure process and help people adjust their loans. The large amount of properties which are under foreclosure has brought the banks to realize that loan modifications need to be made to remain in business.
Additionally, it is in a homeowner’s best interest to do everything they can to prevent foreclosure and apply for a loan modification instead. Truthfully, considering our country’s current economic situation, loan modifications are perhaps our best chance at effectively preventing more homes from going into foreclosure.
Loan modification programs allow the homeowner to deal with a more reasonable monthly payment. To be eligible for one of these programs, a homeowner may be in financial difficulties.
However, applying for a loan modification follows specific steps and procedures. Unfortunately, this process requires a great deal of time, up to several months before a decision is made regarding a homeowner’s mortgage.
Applying for a modification of a loan requires the owner to disclose all of their fiscal information to the lender. Homeowners must regularly check the status of their application with the lender or company who is handling the modification of their loan.
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