Should You Seek a Mortgage Loan Modification?

A Loan Modification is a permanent change in one or more of the terms of a loan. Loan modification allows the loan to be reinstated, and results in a payment the homeowner can afford.

When to apply

You should consider loan modification if you are likely to fall behind on your mortgage payments or if you have fallen behind on your mortgage payments. If you have fallen behind on your mortgage payments by six months, your lender generally will not consider your application.

Information

When you negotiate with your lender, you should be able to explain the following:

• Reasons for you to fall behind in your monthly payments – loss of job, unexpected medical expenses, etc
• Your current resources – monthly income, benefits, savings and investments
• Your other liabilities, debts and expenses – food, utilities, insurance, loan payments, credit card payments, etc
• Your repayment plans – this will have an impact on how the lender will help you.

Your lender will categorize your reasons for default into either hardship beyond your control – unemployment, unexpected medical expenses, etc or hardships caused by choice – purchase of expensive car. Your lender will try and determine the duration of the hardship. You must provide your lender with all your financial data. This will be used by your lender to determine your current financial status and your ability to make payments.

What you need to know

A loan modification will result in affordable payments – lower monthly dues and payment obligations. It will also reinstate your loan. Based on the type of loan modification, you get the following benefits:

• interest rate reduction 
• extended amortization (40 to 50 years),
• principal balance reduction

If you are a homeowner in default, a loan modification can stop foreclosure. Since your lender already has much of the documents and information about you on their file, the paperwork involved is minimal and the processing is faster. Loan modification is one of the best options you can take when you are in danger of foreclosure. Aside from saving a lot of money, it also assures you of easier and more manageable payments that can help save your home from possible foreclosure.

Loan modification involves costs. Loan modification can cost anywhere from $2,000 to $5,000. Loan modification can affect your credit score especially if you have defaulted on your monthly payments prior to the loan modification.

When to Talk to an Attorney

You should consider loan modification if you have all the required information in place. Consult with an experienced foreclosure attorney. An experienced foreclosure attorney can study your case and let you know if you should consider loan modification.