Modifying your mortgage has gotten a lot easier in recent months, and now the U.S. government is waiving some important taxes associated with the procedure – at least temporarily. In the past, homeowners who were granted a loan modification were forced to pay high taxes on any loan amounts, interest and penalties that were forgiven by their lender. That left many strapped homeowners getting out of trouble with their mortgage lenders, only to find themselves in even more trouble with the IRS!
The good news is that the federal government has taken steps in recent months to ease this tax burden on those seeking mortgage help between 2007 and 2010. The problem is if you don’t understand how this tax reprieve works, you could find yourself paying the IRS big bucks down the line. One of the biggest problems with the new law is that it only affects federal taxes. Many states continue to collect income taxes on mortgage forgiveness amounts, leaving some taxpayers owing thousands in state taxes after knowing of How to loan modification .
All economic indicators project that for many subprime borrowers with adjustable rate mortgages, default will eventually occur. Capitalistic wisdom should dictate that financial institutions will cut their losses now and not want to be taken down in the spiral as real estate values plummet over the months to come. The lenders knew that the subprime loans were made to high risk borrowers, but they took the risk. Now that they are faced with defaults on their investments, they may be willing to lose some profit to avoid further loss. For those who are pursuing a negotiation for loan modification with their lender, here are my suggestions: LEARN YOUR LENDER POLICIES- Become knowledgeable and familiar with your lender’s loan modification policies. For rate modifications, know if the lender will accept an application before the rate becomes adjustable or increases. Some lenders require a borrower to be delinquent for at least three months before they even accept an application for loan modification. Lenders often have different policies for borrowers who can no longer pay due to job loss or health issues. GET YOUR LENDERS LOAN MODIFICATION PACKAGE BEFORE YOU START NEGOTIATING- Before calling and giving all your information, ask for a written loan modification package from your lender. If they are willing to send you an application, you will see what information they need and what their policies are. You will then have time to reflect on your answers and not be pressured into answering over the telephone. Additionally, when lenders have their own unique forms, any applications which are not submitted on those forms will fall to the bottom of the pile and face delay in processing.
Will a loan modification help me stop foreclosure? Yes, that is the goal-by working with your lender to find a loan workout solution, your loan is brought current and the foreclosure process is halted.
Can my missed payments be added back into my new loan modification? Yes, the arrears can be added to the new loan balance and spread out over the term to allow the loan to be brought current.
Can I do a loan modification myself or should I pay someone to represent me? That is entirely up to you and your comfort level with dealing with your lender. The Treasury Department is strongly discouraging the payment of any fee to a third party to represent you in a loan workout. Regardless of what you decide, the first thing you should do is learn all you can about the process, your legal rights, and what it takes to get your application approved. An informed homeowner is harder to take advantage of and will have a much greater chance of success.
So how do I get started to modify my loan? Before contacting your bank’s loss mitigation department or a loan mod company, do your homework-learn as much as you can about the loan modification process so you can make informed decisions.
President Obama’s Home Affordable Modification Plan offers real hope for millions of homeowners who need a solution to stay in their home. Not everyone will qualify however, and interested borrowers will have to complete loan modification application forms, provide proof of their income and meet certain eligibility requirements. Most lenders are participating in this new government subsidized plan, and homeowners are encouraged to learn how they can qualify and apply for a loan workout and avoid foreclosure.
Learn more about Obama Mortgage Relief Plan Qualifications.
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