What happens during a Loan Modification?

During a loan modification the terms of your mortgage are renegotiated to bring the interest rate down to a percentage that fits into your budget and the monthly payment no longer presents a severe strain on your ability to meet your other financial obligations.

Are you a good candidate for Loan Modification?

Any homeowner currently stuck with an adjustable rate mortgage that has been or will be adjusting upwards is a premier candidate for loan modification. Millions of Americans were lured into signing up for interest only mortgage loans and while initially the loan was low and affordable, the double impact of rising interest rates and the inclusion of principal into the payment have caused borrowers to see their payments triple or even quadruple! The temporary one or two month forbearance your lender offers is a Band-Aid but not a bona fide solution to the problem that will get worse and the only way to halt the skyrocketing house payment and keep your credit intact at the same time is with the help of a loan modification.

Can any type of loan be modified?

Loan modification requires an agreement between both the borrower and the lender. Depending upon your particular situation and terms of your loan the modification approval is soley up to your lender. Even though the foreclosure process is costly if the lender determines that it's more beneficial for them to foreclose then a modification might not be granted. Although due to the current status of the housing market loan modification are becoming increasingly more popular and used as a alternative to foreclosure.

How far behind on my payments do I have to be before I qualify for a loan modification?

If you know that you are unable to make the next payment you should contact your lender immediately. There have been instances where loan modifications have been made when borrowers are not behind on their mortgage at all. This is all dependent upon the state of hardship a borrower is in. Keep in mind that lenders prioritize loan modifications based on the stage of deliquency a borrower is in. So a borrower who is not deliquent on their mortgage will not be as much of a priority as someone who is a few weeks away from foreclosure.