Many homeowners across California are opting for loan modification to prevent home foreclosures. California witnesses around 80,000 to 90,000 foreclosure filings every month. According to new California law, a lender has to place comprehensive loan modification program that meets certain standards or has to give 90 days advance notice to homeowners before foreclosing.

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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.

Thus, it is best for homeowners to prevent home foreclosures by applying for loan modification for lower interest rates. In fact, in the current’s economic crunch, loan modification may prove to be the only way to prevent home foreclosures.

With loan modification, it is possible to reduce the monthly payment at affordable levels. Families facing hardship and not having control over their finances are highly eligible for loan modification program.

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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