Loan Modifications: An Effective Way to Stop Foreclosure?

We often get the question on whether a loan modification will stop foreclosure. 

Unfortunately the answer to that question is: It Depends.

It depends upon the following information on whether a bank will stop foreclosure on a property that is in default:

1. It depend upon the bank. Different lenders have different rules.

2. It depends upon the financial situation of the homeowners. Banks have specific formulas on how they determine if a homeowner is qualified for a loan modification

3. It depends upon when the forcloure sale date it.  If the foreclosure is less than a week away, many times the bank may not postpone the forclosure.

4. It depends upon whether the house has equity or not.

5. It depends upon the neighborhood the house is located in. Are there other foreclosures in the same neighborhood?  Are homes selling fast or slow?

6. It depend upon who actually owns the loan. If it is a direct lender such as Wells Fargo, then a loan modification may be easier and a postponment easier as well.

7. It depends upon whether all the loan modification paperwork is in their hands compared to the foreclosure sale date.

8. It depends upon whether the house is your primary residence or a rental or secondary home.

For example, if you have an Indymac loan and it is a rental, then postponing the foreclosure using a loan modification most likely will not happen. Indymac does not do loan modifications for rental.  If you have a Countrywide loan, their loss mitigation department encourages loan modifications. Same for Bank of America loan modifications.

So the real answer to the question whether a loan modification will stop foreclosure is that it depends upon your particular circumstance. 

A decent loan modification professional and a 15 minute interview may determine if a loan modification is an effective tool to stop foreclosure.