Getting turned down on a home loan modification can be a devastating event leading to either foreclosure or the uncertainty of waiting in limbo for the home to sell at auction. Homeowners are currently being disqualified or not approved for variety of reasons including loss of employment, excessively high mortgage debt relative to income, and/or too much consumer (i.e. credit card) debt. Under normal economic conditions, a failed attempt at a loan modification would have immediate negative results as the foreclosure process would roll forward to the sale at auction with eviction following closely thereafter. That’s under normal conditions. If there is any good news coming from the current foreclosure crisis, it’s that the flood of foreclosures has glutted the market and only a small percentage of homes are selling at auction.

The excess supply of foreclosed homes is providing homeowners with a window of opportunity which could allow a second chance at a successful modification. Lenders, motivated by incentives from the administration’s Home Affordability and Stability Plan are taking a second look at homeowners that may have been close to approval but were turned down. Whether you were close or not, getting approved on a second try can happen with the right game plan. If raising your income isn’t an option, you’re going to have to reduce your payments on accumulated debt to get approved for the modification.

First, enlist the services of an attorney with extensive home loan modification experience. A vast majority of borrowers that get turned down for a loan modification tried to get it done on their own. As is often the case, the modification didn’t work out because of correctable errors by the homeowner which would have been caught by an attorney who knows what to watch for during the process. An experienced attorney, after getting familiarized with your total financial picture, can then guide you through two processes of eliminating debt that can both get your loan modification approved and improve your finances dramatically.

* In a personal bankruptcy filing, if the second mortgage or home equity line of credit has no equity coverage in the related property, the bankruptcy judge can change status of the second mortgage into a “wholly unsecured” personal loan which can be discharged in bankruptcy. For example, if you owe $ 400,000 on your first mortgage and $ 125,000 on your second with an appraised property value of $ 380,000, your second mortgage is considered to be unsecured by the property. The bankruptcy judge can make ruling which turns the second mortgage into an unsecured loan with a motion that your attorney raises in court. The second is then considered to be in the same class as other unsecured loans which can be discharged in the same manner as credit card or department store debt. The discharge would eliminate

* If there isn’t a second mortgage, a debt negotiation can eliminate a substantial chunk of credit card and other consumer debt while cutting the payment obligation on the debt in half. Besides credit cards debts that can be included in a debt negotiation include medical bills, unpaid rent, signature loans, consumer loans and department store debt. A flexible payment plan can be set up allowing for full payment of the negotiated debt over a span of eighteen to forty eight months.

Be sure to employ an attorney to see you through either process to ensure that the outcome is the most optimal for your personal situation. That being said, if your desire is to stay in your home you have options which can reduce your payments, avoid foreclosure, and eliminate what could have been a lifetime of debt within a few years.