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Underwater Mortgage Loan Modification: Just a Band-Aid?

Guest post by: Bud Gragg

Article Overview: If you're feeling trapped by your underwater mortgage and are having trouble making your payments, you may be tempted to start thinking that the modification program you heard about just might be for you. We wish we could tell you differently, but that's just not the case. Most of the mortgage modifications out there aren't even a Band-Aid-they just prolong the pain; they don't heal it. And for the most part, you can't even get the Band-Aid.

Underwater Mortgage Loan Modification: Just a Band-Aid?

If you're feeling trapped by your underwater mortgage and are having trouble making your payments, you may be tempted to start thinking that the modification program you heard about just might be for you.

We wish we could tell you differently, but that's just not the case. Most of the mortgage modifications out there aren't even a Band-Aid—they just prolong the pain; they don't heal it. And for the most part, you can't even get the Band-Aid.

Only 2.8% of the homeowners who apply for mortgage modifications actually get them.

Some help, right? But just so you know everything you need to know, let's go over mortgage modifications a bit more thoroughly.

There are 3 kinds of mortgage modifications. Two of them end up with lower mortgage payments now, but ultimately you pay more for the mortgage then you would have before! They do that by either lowering your monthly payment or extending the length of the mortgage—essentially the same thing. But being screwed is still being screwed, no matter what you call it!

The third kind of mortgage modification might just help if you can get it. In this type, the mortgage lender actually cuts down the principle owed. In other words, it's an actual break that reflects what your house is worth now! But the lenders hate this option because it means less profit for them.

What does this mean? It means that even if you're one of the very lucky, very few who qualify for a mortgage modification, don't expect anything resembling any real help out of it. The vast majority of mortgage modifications don't put a Band-Aid on the problem. They put salt on it!

But mortgage modifications do have one solid use. When you apply for a mortgage modification, you don't have to make any payments until you've been given a determination by your lender.

That's right. Just by applying for the modification, you get to live in your house rent-free. Now, this won't get you off the hook for future payments—if you decide to give up and start paying again on your underwater mortgage. But this delay can be a reasonable part of a strategic default on your mortgage, because it gives you more time to save up for your life after foreclosure.

How much time? It's hard to say, but with the glut of foreclosures going on these days, you can almost guarantee it'll take 6 months. That's a lot of mortgage payments that you can put in the bank!

There is a new government program, which unlike mortgage modifications might actually help homeowners. This program facilitates short sales and even provides homeowners with money to relocate!

The Home Affordable Foreclosure Alternatives Program, or HAFA, is a government program so that means you'll have a lot of hoops to jump through to get it, even if you qualify. But again, at the very least this is another application process that you can use to delay foreclosure on your underwater mortgage.

So, no—you're not a bank, so you can't expect any real help from the government for dealing with your underwater mortgage. And you certainly can't depend on most mortgage lenders to be helpful at all!

But you can learn everything you need to know to make the best decisions for you and your family, you can strategically default if you need to, and you can go on to an even better life once you're no longer saddled with that underwater mortgage!

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  Where to Look for Help for Your Underwater Mortgage
  Underwater Mortgage Solutions: What Is a Short Sale?
  Rebuilding Your Credit after Foreclosure on an Underwater Mortgage
  The Most Common Underwater Mortgage Mistakes-And How to Avoid Them
  What to Do before Foreclosing on or Short Selling Your Underwater Mortgage
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  Save Our Home: Mortgage Help for Struggling Homeowners
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  Mortgage Modification Saving Tips
  The Process Required For Obtaining a Mortgage Modification
  More People Walking Away from Underwater Mortgages
  Do You Qualify for the Obama Loan Modification Plan?
  Coming Soon to Your Neighborhood: Falling Home Values Mean More Underwater Mortgages
  Your Life or Your House: Key Questions to Ask Yourself If You’re Facing an Underwater Mortgage
  Need Underwater Mortgage Help? Here’s Where to Turn
  LTV: The Key to the Underwater Mortgage
  Short Sale Training Boot Camp for the Underwater Mortgage Homeowner

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