Step 10 to loan modification protocol...Don't give up.

10. Don't give up.

Many homeowners are walking away from their homes – walking away from all the work and money they have invested. While it is true that some people are in homes that they will never be able to afford, banks are overloaded with foreclosure inventory. They are motivated to find a way for you to avoid foreclosure. Think of all the payments you've made. Staying in your home is the only way to save your investment.

Lenders frequently bundle their loans together and sell them as mortgage backed securities. Your original lender may have sold your loan to another institution. This is standard practice and is no reflection on you as a client. Your bad loan may not be your current lender's fault. Keep that in mind. Hopefully it will prevent you from mentally vilifying your lender.

Be advised, the lender's goal is to get as much of their money back as possible.

Lenders use complex math formulas to make decisions. There is a formula that determines something called the Net Present Value of your home. NPV is used to determine whether the lender stands to make more of their money back through foreclosure or through loan modification. If calculations indicate that the lender can make more money through foreclosure, they will reject your request for loan modification.

Not all loan modifications are good, and misunderstandings are common. Make sure you know what you are getting into. Along the way, you should ask lots of questions:

· Ask if your interest rate reduction is temporary. You may think you are getting more concessions than you really are.

· Ask what your loan payment will be once the modification is complete.

· Ask if your payment reduction is temporary. If so, ask what your future payments will be.

· Ask what your final principal balance (the total amount you owe) will be.

What kind of reduction can you expect? The banks tend to use the 30% rule when determining their idea of how much you can afford. For example, if your gross monthly income (that means BEFORE taxes) is $5000 -- or $60,000 a year -- the bank's calculations say you should be able to make ends meet with a mortgage payment of around $1500 a month (30% of your gross monthly income).

Don't expect them to go much below the 30% mark.

If you cannot pay 30% of your monthly income for your mortgage, you may be in a home you cannot afford. There are other ways to avoid foreclosure, though.