With so many behind on their mortgage payments and foreclosure looming around the corner, many have begun investigating potential solutions to their financial troubles. There are many options on the table, which can complicate the mortgage relief process. One concept is to enter a loan workout, which basically refers to plan to restructure mortgage debts in the face of foreclosure.
Working Out The Plan
A loan workout is also referred to as a mortgage loan modification. The process begins with the borrower and lender discussing different options to help resolve mortgage debts with minimal impact to both the lender and the borrower. While this may seem easy, but there are numerous factors that come into play when agreeing on a mortgage modification plan.
It is important to remember that the lender and borrower have different motives for entering the modification plan. The lender is always looking to recoup as much of the missed mortgage payments as possible and the borrower is looking for financial relief, while also avoiding foreclosure. The lender will be looking for proof of a financial hardship and how much the borrower can realistically afford. The borrower can bet that the lender is only willing to compromise to the level of the maximum amount they can afford to repay and no less.
Lenders prefer repayment plans that can take place easily and quickly, in order to maximize the amount of money repaid towards the mortgage debts. Some changes the lender may be willing to compromise on are (a) extending the life of the loan, (b) reducing the interest rate on the loan, (c) waiving delinquency fees or (d) temporarily suspending payments for up to six months.