A loan modification is an agreement that helps reduce debtor’s mortgage interest rates to a level that enables their timely mortgage payments. Although different lenders have different criteria for offering loan modifications, some basic factors include the debtor’s payment capacity, debt to income ratio, credit, mortgage payment history and property value.

Reasons for the Failure of Loan Modifications in Florida

• Many loan modification plans do not work favorably because these are normally unaffordable on a long-term basis; which means they only help delay foreclosure. Hence, homeowners invariably find themselves dragged into default and mounting debt over a period of time. Here are some other reasons for loan modifications fail in Florida:

• Increased balances: Since most lenders add fees and unpaid interests to the balance loan amount. The renewed mortgage debt amount is now greater than the original amount. In fact, most lenders do not reduce the principal loan amount. A
• Increased Payments: Adding fees to the total loan balance results in increased total monthly payments. Thus, a loan modification plan that increases the loan balance enhances the chances of re-default (almost 45% of all loan modifications resulted in increased monthly payments).
• Underwater mortgage: Several borrowers who opt for loan modifications find that the market value of their property is lesser than the debt amount they owe. Thus, it makes sense short sell the property than keep paying the enhanced debt amount.
• Accepting unaffordable terms: Homeowners accept unaffordable modification terms in a bid to save their homes from foreclosure. Experts suggest that unfavorable terms must be countered and only fair and just terms be accepted.

• Know the System: Most people fail to obtain a favorable deal because of their lack of awareness of the system. For instance, borrowers may find themselves stuck at the customer service department or with a loan modification broker, when they should actually be dealing with the loss mitigation department. Hence, getting in touch with the right people is the first step to obtaining loan modifications.

To learn more about short sales get in touch with the professionals at www.floridashortsaleshelp.com.

A short sale is a real estate property sale whose sales proceeds are much lesser than the debt amount owed on the property. Short sale is normally resorted to when the borrower is unable to pay the due mortgage amount, because of which the property is decided to be sold at a moderate loss than wait for the borrower to pay it back. This also helps prevent foreclosure, a process that costs the lender dearly and also reduces the borrower’s credit score.

Advantages of a Short Sale

Homeowners normally prefer a short sale over foreclosure and loan modifications. This is because:

• They get relief from mortgage payments and related stress
• Dignity in having sold the property
• Chance to save their credit record, since it is not reported as foreclosure to the credit bureau
• A faster option than the mortgage foreclosure process
• Escape the stigma of foreclosure
• To be eligible to purchase another home in two years
• If the payment is not late by more than 60 days, they can purchase a home immediately.

The 2008 financial crisis has enhanced banks’ acceptance of short sales. This is because the declining market has turned several banks averse to taking over property and more open towards offering concessions on debt. A short sale is beneficial to all parties including the lender, the borrower and the buyer. While the lender recovers at least some part of the money lent, the seller gets rid of the property and the buyer gets to purchase a property at a discounted price.

Any homeowner who can demonstrate financial hardship or insolvency, and prove his inability to make the mortgage payment is eligible for short sale. Several homeowners are also worried about receiving IRS Form 1099 from the loan servicer about the forgiven loan amount. However, this is a relatively smaller menace when compared to other options, such as foreclosure, which stays on one’s credit report for 10 years and lowers the credit score by as much as 350 points.  A short sale, on the other hand, stays for a shorter period on your credit and lowers credit score only by around 80-150 points.

To obtain short sale assistance or pre-foreclosure help in Florida, contact the expert Realtors at www.floridashortsaleshelp.com. The company has been providing compassionate and trustworthy services to homeowners and buyers across Florida.