KNOXVILLE (WATE) -- A lot of families are struggling financially and the Obama administration has promised to help some keep their homes through mortgage modification. That's different than refinancing.
Most home loan modifications lower your interest rate, which in turn lowers your monthly payments. That's good for you and also for your loan company. As long as you continue to pay, they make more money than they would by having to foreclose on your home.
The federal government has set out some guidelines to help stabilize the housing market, but you the homeowner actually have to plead your case to your existing lender.
"I was speechless. I was absolutely in tears," says single mother and realtor Lori D. Barlow.
She was just approved by her bank for a home loan modification at a lower interest rate that cuts her monthly payment in half.
"They did work with me and they lowered it today to actually two percent for the next five years," Barlow says.
But she says that break didn't come easily.
"I diligently called two to four times a week even though they suggested that I only call once a week and I stayed on top of it and I was determined," she says.
Barlow hadn't missed any mortgage payments yet, but with no income and her savings gone, she was on the brink.
"I had to provide a home for my child and it's been very difficult for us the past 18 months," she says.
"Probably 40 percent of the people who have mortgages could qualify for a loan modification," says Nick Galbraith with Keystone Mortgage Group in Knoxville.
He says the problem is getting approved.
"The servicers, the ones doing the loan modifications, they just don't have the staff," he says.
There are outside companies that promise to help you get you a loan modification if you pay them first. Galbraith says beware.
"There's just a huge opportunity for scams," he says.
"You do not have to pay anyone to do this loan modification. All you need to do is pick up the phone and call your lender and do not be afraid," she says.
To qualify for a loan modification, you'll need to provide your lender with a hardship letter that explains why you can no longer afford your current mortgage. You'll have to back that up with financial statements. If the company believes they'll get more money from you in the long run by adjusting your interest rate now, you've got a shot.
For more information on Home Loan Modification, go to:
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