What is a Loan Modification?

It’s when a lender negotiates to change the terms of a mortgage. The result of the negotiation could be:

• A lower interest rate
• The amount owed on the loan could be lowered.
• Adjustable interest rates can be changed to low fixed rates
• Back payments owed can be added to the loan principle
• Late fees waived
• The term of the loan can be lengthened
• Second mortgages could be waived or re-negotiated
• A combination of the above

What does this mean to you?

If you are in a situation where you are unable to make your mortgage payments because your interest rate adjusted to a point where your payments are just too high for your budget, a loan modification could reduce your monthly payment by hundreds of dollars to something you can afford so you can stay in your home.

Why would a lender re-negotiate the terms of your loan?

If you are unable to make your mortgage payments because of a hardship, the normal option the lender has is to foreclose on your house. Lenders do not want to be in the real estate business! They are in the loan business. It is expensive for them to process a foreclosure. After they take over the house, they have to maintain it and sell it. When it is vacant it is the target of vandals, the property quickly falls in to dis-repair and is a blight on the neighborhood. The price they can sell it for quickly drops, and they no doubt will have to sell it for much less than what you owe them on the house.

A foreclosure is the most expensive option the lender has. A loan modification is by far the least expensive option!

If you can modify the terms of your loan, you can:

• Keep your home
• Avoid foreclosure
• Avoid bankruptcy
• Bring your mortgage current