Loan Modification

Loan Modifications, How to Avoid Collateral Expenses

By Andrew

Unfortunately nothing is free in this world; even dying costs around $5,000 dollars, for an average funeral in the US.  Applying for loan modifications can be pricey also. Sadly the procedure that could save you from foreclosing on your home and even bankruptcy is also rather expensive, which scares many homeowners off, pushing them further into debt when sometimes they qualify for a loan modification.

The collateral expenses of a loan modification are various. You have to invest large amounts of time in order to apply and get the paperwork together. If you are self employed or are too busy at work to do this in your spare time, it could cost you a lot in lost work or business.

This has made many borrowers hire the services of loan modification companies so they can take care of all the red tape and complicated paperwork. Unfortunately this has created yet another collateral expense for homeowners. These companies can be very expensive, especially for families that are already on the brink of a financial breakdown.

In order to avoid this cost it is worth investing a little time understanding the requirements for a modification and visiting a free counselor near you. Phone the HOPE hotline and ask which free counseling agency is closer to you. They will be able to help you put your paperwork together without charging you hundreds if not thousands of dollars.

Other types of expenses homeowners must think about when submitting a loan modification are hidden costs like inspection fees, and late payment fees. Banks will often require a home inspection before granting a loan modification. As annoying as it is to have to undergo a second inspection on your home it could be necessary in order to pass the NPV test.

The NPV or Net Present Value test is a requirement for any homeowner that is requesting a loan modification. The test quantifies the profitability for the bank of granting the modification. This means that the bank is only going to give you a modification if doing so is more profitable than simply foreclosing the mortgage.  Although there are many factors that make up the test, a current valuation of the home is required. It could even be in your interest if there is a new inspection that shows that the current value of the home is below the value of the mortgage.

Late fees are another issue for troubled homeowners that are seeking financial help. It is possible that your bank will grant you a loan modification but charge you for inspection fees and late charges on the side. This could make your total monthly mortgage payments increase even though your modified loan has lower payments.

It is a good idea to ask your bank for a good faith estimate to the cost of the loan modification and the monthly payments that will result from the modification. Make sure they include all expenses and that they include the expenses back into the mortgage. This way your monthly payments will not consist of two mortgage payments, your modified loan and the collateral expenses.

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Related posts:

1. Loan Modifications Questions: Fees, Inspections, Late Charges And Other Concerns
2. Loan Modifications, NPV Test the Key to Loan Modification Success
3. Loan Modifications: The Loan Workout Formula To Accelerate Your Modification

1. Loan Modifications Questions: Fees, Inspections, Late Charges And Other Concerns
2. Loan Modifications, NPV Test the Key to Loan Modification Success
3. Loan Modifications: The Loan Workout Formula To Accelerate Your Modification

Full post as published by Blown Mortgage on February 23, 2010 (boomark / email).