Loan Modification

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Loan modification has been receiving much more attention in the last year due to the difficulties both in real estate and the global economy.  Many restrictions have been modified and in some cases completely removed in order to make it easier for citizens who are facing financial difficulty. 

In short, loan modification is a reassessment of the borrower’s mortgage.  The lender will review the terms of the loan and permanently modify it in order to lower the monthly payment to an amount the borrower can pay.

Loan Modification Benefits

A loan modification has many benefits for the borrower.  First, it is a sure way to avoid foreclosure.  When an individual chooses to pursue loan modification it is in his or her favor because it will not jeopardize the credit of that individual. 

Secondly, loan modifications are a long term resolve.  They are not a quick fix like refinancing or consolidations; they are a way to permanently change the terms of the mortgage loan.  This will resolve any fears of the future and put to rest the unknowns of the remainder of the loan.  Lastly, loan modification is set up to build the individuals credit score.  Because the payments are more affordable, the borrower can now pay on time, every time.

Lenders are warming to Loan Modifications

Not only are they beneficial for the borrower, but they are also looked upon favorably by the lender.  First, all expenses are put into the new, modified loan so that the lender isn’t loosing anything from the bottom line.  Secondly, the lender can be more confident that the borrower is going to pay on the terms of the loan.  A great amount of security is established in the borrower/lender relationship.  Thirdly, foreclosure is avoided, which the lender will want to avoid at any cost.  Lastly, the lender will have fewer loans in default, providing a more substantial portfolio.

There are three main items that are required by anyone choosing to explore a loan modification:

• 1. The motivation to save the house.  One of the first things a lender is looking for is how aggressive the borrower is about saving their home.  If the borrower does his or her homework and is prepared with bills, a budget and a plan of action, the lender will look upon the borrower with favor.
  2. Some level of financial difficulty must be proven.  Obviously, over spending or laziness will disqualify any borrower from consideration.  Life events such as losing a job, going through a divorce or a death in the immediate family would warrant the need for a possible loan modification.
  3. Proof that the borrower has an action plan of how he or she will be able to continually afford the new payments established.  The lender will want to see that the modified loan will be well within the financial reach of the borrower.   

Loan modification is a great way to avoid foreclosure and help those facing financial difficulty.  In many cases it proves to be a win/win for both parties.  The key to successfully applying and getting approved for a loan modification is to be prepared and show motivation to do whatever it takes to the house.

If you want help to do your loan modification (the process can be tough): go HERE