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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.

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

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

Home prices fell just 2.5% during the last three month of 2009 compared with the fourth quarter of 2008, according to a closely watched gauge of home price movement. That was a big improvement over the past three years.

Lowe's reported a better-than-expected profit for the fourth quarter on Monday, and the nation's second-largest home-improvement retailer indicated that 2010 would be a better year for the housing market.

If loan modifications are not an option and you want to avoid foreclosure or bankruptcy a short sale of your home might be a good option. The key when you are undergoing a bad financial situation is like with every emergency and try to think clearly without letting raw emotions take over. You must analyze the situation and work out what is the best option for you. Although it is a good idea to hire an experienced lawyer in real estate issues, nobody can do all the thinking for you, you have a unique understanding of your situation and more importantly you will be the one that will suffer or enjoy the consequences of your decisions.

A short sale is the sale of your home at a price lower than the purchasing price. It is an option to be considered if you do not qualify for a loan modification, due to a lack of income or when you own a home that is worth less than what you owe on the mortgage.

Obviously the key player in a short sale is the lender. The lender is, after all, the party that may have to take any losses that occur by short selling the house. However, in some short sale agreements the buyer can be made responsible for the difference between the price of the short sale and the balance of the mortgage. Needless to say that is not the ideal type of mortgage for you, the homeowner.

There are three possible outcomes a lender may agree to when negotiating a short sale. The key concept you negotiate in a short sale is what will happen with the deficiency balance or the difference between price of the short sale and the pending balance on the loan.

The first option a lender may try for is to lay the deficiency balance on the lap of the homeowner once the short sale has been carried out. Needless to say homeowners do not often profit all that much from this kind of short sale.

A second option is for the homeowner to sign a promissory note to the lender for the deficiency balance. This means that the homeowner will have to pay whatever agreed in the promissory note if the there is a deficiency balance after the short sale. However if the deficiency balance is larger than what the homeowner agreed to pay in the promissory note the lender will absorb the difference.

The third option is the one you need to aim for if you are the homeowner. In this case the lender agrees to cancel the entire deficiency balance, or difference between the short sale and the pending balance on the mortgage. As you probably guessed lenders are not waiting in line to offer this kind of deal, you will have to work hard for it.

The most important part of negotiating a short sale is to convince the lender that it is in their best interest to accept a short sale. To do this you must a) prove you cannot afford the mortgage due to a valid hardship and do not have the assets to pay for the mortgage and b) present your home as a business opportunity for the bank.

In order to do all that, you are going to have to submit a whole lot of paperwork to your lender. This will include:

A)     A hardship letter that explains why you are in financial trouble and explains how you do not have the income or savings to pay for the mortgage.

B)     Proof for all the claims you make in your hardship letter. This will include proof of unemployment or of your current pay if you are still working.  You will also need to prove what income you have through  bank statements and tax returns. The lender will no doubt ask you if you have access to pension funds, stocks or some other type of investment. You will have to provide a written statement that answers these questions and explains why they are not accessible.

C)     You need to provide an up-to-date valuation on your home. This you can carry out with a broker’s appraisal and by providing analysis of closed deals or active listings of similar properties in your neighborhood.

D)    Authorization to the lender to release information on you and the property.

It is a good idea to prepare this paperwork with care and hire a good real estate attorney. The good news is that if you play it well you can include the price of the lawyer in the proceedings costs covered by the lender.

Related posts:

1. Loan Modification Alternatives: Short Sale Your Home
2. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
3. Deed In Lieu of Foreclosure, The Last Resort Loan Modification

Related posts:

1. Loan Modification Alternatives: Short Sale Your Home
2. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
3. Deed In Lieu of Foreclosure, The Last Resort Loan Modification

If you do not qualify for a loan modification, and foreclosure seems unavoidable, there are steps you can take to make the most of a bad situation. One of these options is arranging with your lender for a Deed in Lieu of Foreclosure.

What does this mean?

It means you hand over the deed, or ownership, of your house to the lender in exchange of clearing your debt. The homeowner loses his home but is left without a debt while the lender takes immediate control of the house.

What advantages does this option have?

In certain circumstances a Deed in Lieu of Foreclosure can have significant advantages for both the lender and the buyer.

1)     The lender can take immediate control over the property. A much more efficient method than foreclosure proceedings that can take years to finish.

2)     The borrower foregoes his home but is left without any debt.

3)     Lenders can save themselves a lot of money in court expenses, time and other complications if they avoid a typical repossession procedure.

4)     Borrowers that avoid a foreclosure will remove the stain on their record and in some cases avoid bankruptcy.

What are the requirements for a Deed in Lieu of Foreclosure to be carried out?

1) The market value of the home must be less than the current balance of the mortgage.

2) There must be no third party credits secured by the home, like a second mortgage or a secured car loan.

Although it might seem counterintuitive for a homeowner to let his home, probably his largest investment, go without anything to show for it, it can be a much better alternative than a long and painful foreclosure. Borrowers don’t have to see their credit score hurt and can start again elsewhere, while lenders can cut their losses and try to make the most of a bad loan without having to continue spending money and resources.

In what circumstances should a homeowner think about handing a Deed in Lieu of Foreclosure?

Obviously, homeowners that are going through financial difficulties and cannot afford their monthly mortgage payments. However if they still have some sort of income then they may well qualify for a home modification or some other option. This path is more suited for homeowners that either cannot afford any kind of loan modification or feel that their home is too underwater, worth less than the mortgage balance, to be worth saving.

How is it done?

Both parties must agree to sign an Agreement in Lieu of Foreclosure. This document transfers ownership to the lender. In some cases the homeowner might pay a certain amount of money to reduce the loan and make sure her credit score is not affected. Once the document is signed the lender will issue a waiver to deficiency judgment, which will be used if the sale of the house is below the value of the mortgage. After this an escrow service executes the agreement; releasing both the lender and the borrower from their mortgage contract.

Related posts:

1. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
2. What Is A Foreclosure?
3. What Is A Loan Modification? The Three Keys To Loan Modification Success

Related posts:

1. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
2. What Is A Foreclosure?
3. What Is A Loan Modification? The Three Keys To Loan Modification Success

Under pressure to do more for troubled homeowners, President Obama is expected to announce on Friday a $1.5 billion program to help borrowers in the five states hit hardest by the housing crisis.

The recent spike in the number of delinquent Federal Housing Administration-insured loans has some people worried that taxpayers will eventually have to bail the agency out.

The mortgage market may have begun to turn: Fewer borrowers fell behind on their payments during the last three months of 2009.

Renting a home that is going through foreclosure? If so, don't be fooled: Lenders can't kick you out; they have to honor the terms of your lease.

One year after President Obama unveiled an ambitious plan to help struggling homeowners, more than 116,000 borrowers have received long-term reductions in their mortgage payments through January.