Simplifying The Mortgage Modification Process #1: A Fiscally Responsible You

Before approaching your bank about a mortgage modification, you need to ask yourself several questions:

1.)   Is my financial health in trouble in the long or short term?

2.)   What can I do now to improve my financial standing/credit rating?

Depending on how you answer, you may be looking at forbearance instead of a loan modification.

Your financial health

If you have just suffered a pay reduction, it is imperative you take a long look at your expenses. If you find you can reduce other expenses to meet the demands of a mortgage in the longer term, you should approach the bank about forbearance. Forbearance is for folks whose financial health only suffers due to ‘overindulgence.’ You had more money, so more things. Now that you have less money, how can you reduce, save, and begin repaying your mortgage as agreed?

Approaching the bank about forbearance with a well-laid financial plan that addresses your insolvency now, but expected solvency in 6-9 months will put you on the road to financial health quickly.

Pay down revolving credit and cut wastefulness

Many people live outside their means. Living even a fraction over your income means debt. In order to stay in the black, you need to save and reduce your reliance on credit. While you are evaluating the usefulness of forbearance, you want to pay down old, revolving credit card debt so that you can more easily adjust to the unexpected under the conditions of your forbearance terms. The forbearance period should be a time of fiscal moderation.