Home loans are granted by banks who are FDIC insured. The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails. In essence the FDIC has your back.
Problems with loans today generally revolve around loan modification that puts a borrower in a risky position. Many people are 30-120 days or more behind on their payments. Many face foreclosure and others get a temporary reprieve from their banks. The idea behind a modification is to get your loan to a point where you can afford it and keep up with the payments.
Step 1: Before you get into trouble look at your finances, your reserves, and how much you could afford if you lost your job and for how long.
Step 2: Contact your lender and see if there are modification programs that would work for those numbers in Step 1. You might quickly find you can get a cheaper loan for little or no costs.
Step 3: Do your homework. This means get educated, get savvy, and learn the ins and outs of your options. Get the assistance of HUD-approved housing counseling agencies that are available to provide you with the information and assistance you need to avoid foreclosure. As part of President Obama’s comprehensive Homeowner Affordability and Stability Plan (HASP), you may be eligible for a special Making Home Affordable loan modification or refinance, to reduce your monthly payments and help you keep your home.
Step 4: Keep good records. Mortgages require reams of documentation necessary to process a loan or modification. Gather all your paperwork and keep it in one place. This file will grow, so clearly mark each document and place it in its proper file.
Step 5: Honesty is the best policy: There are dozens of documents to fill out, paperwork to provide and many more questions to answer. In this process there are numerous opportunities to lie with whatever is written down or provided. Be forewarned that banks are getting much better at uncovering these lies and going after violators.
The lending process doesn’t need to be scary, overwhelming or above your head. Just take the time to learn the fundamentals and your loan should be safe and secure.