What is a Loan Modification?

Facing foreclosure can be overwhelming and scary, but by taking the right steps you may be able to keep your home and save your credit.  A loan modification is a process where the original terms of a mortgage are modified, giving the homeowner new payment terms that they can handle. It will usually involve a lower interest rate, extension of the term, adding missed payments to the end of the loan, reduction in principle, or a combination of these.

• Lower Interest rates
• Lower Your monthly payment
• Get a principal reduction
• Avoid foreclosure

How is Loan Modification Different from a Mortgage Refinance?

In the current credit environment refinancing is extremely difficult and time-consuming. Typically, a homeowner must prove that they have excellent credit, job security, and disposable income after the bills are paid, and that they are capable of paying a large mortgage. Wall Street is no longer purchasing loans from banks; therefore lenders have to cut programs for less qualified borrowers. Homeowners that have fallen behind on their mortgage, or who owe more than their house is worth face an even more difficult time trying to refinance. Quite simply, a loan modification may be the only option for a great number of homeowners, particularly in this type of credit market.

Why will a Bank Modify my Loan?

A bank must believe that this will be in their best interest, as it does leave them to lose thousands of dollars. In general they need to know that the homeowner will be able to make payments if the terms are re-negotiated. With the current state of the housing market, the lender could face a loss closer to the millions if they are unable to work out a loan modification.

When a borrower is no longer able to make their payments the loan becomes what is called a nonperforming asset, as the loan is no longer bringing money to the bank. Turning the non-performing asset into a performing asset is a matter of income; if a loan modification is possible a bank wants to be certain that following the modification the loan will remain a performing asset.

If the bank modifies a loan and the borrower is still unable to make the payment the bank loses out even more. This is why it is important to report all of your income on the income/expenses worksheet, because if the bank does not believe you can make the payment they will not modify your loan. It is also important to show that the homeowner is willing to give up luxury items (extra cars, boats, etc.) in order to keep their home.

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Go to the top of the page and enter your zip code to find out if we can connect you with a specialist in your area. Once we successfully receive your information, we will match you with a loan modification specialist who will assist you with your mortgage problem. Act now!