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In order to prevent foreclosures, homeowners throughout California are attempting the loan modification process. The state of California deals with approximately 80,000 to 90,000 foreclosure filings per month. Recently, a new law passed stating that a lender is required to offer the homeowner a comprehensive loan modification program or give a 90 day notices before initiating the foreclosure process.

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The lender’s loan modification program needs to fulfill certain criteria that includes reduction of monthly payments below homeowner’s 38% income. In addition, extending terms of loans or reduced interest rates for next five years are other possibilities that can be used by the homeowners to prevent home foreclosures. Home foreclosure is a costly affair for bankers. A typical foreclosure in California will cost around $60,000 with $4000 alone. In fact, the legal fees cost around 25% of the entire loan amount.

For these costly reasons, California’s banks are seeking to avoid the foreclosure process and help people adjust their loans. The large amount of properties which are under foreclosure has brought the banks to realize that loan modifications need to be made to remain in business.

Additionally, it is in a homeowner’s best interest to do everything they can to prevent foreclosure and apply for a loan modification instead. Truthfully, considering our country’s current economic situation, loan modifications are perhaps our best chance at effectively preventing more homes from going into foreclosure.

Loan modification programs allow the homeowner to deal with a more reasonable monthly payment. To be eligible for one of these programs, a homeowner may be in financial difficulties.

As with everything related to a home loan, there is a detailed process one must use to apply for modification. With the paperwork and authorities involved, the application process can often take months to complete.

Homeowners have to write application letter describing how and why they fell in financial difficulties and status of their financial activities. It is important for homeowner to keep a track of such application by contacting the lender or loan modification company regularly.

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