Mortgage Modification, also known as loan modification, has become quite popular in the recent times. Borrowers who are unable to refinance or go for any alternative repayment plan in order to avoid foreclosure may choose loan modification.
In a mortgage modification, the lender may extend the loan period or reduce the interest rate with the aim to minimize your monthly payments. However, he will add any mortgage dues to the outstanding loan balance. Thus, at times a loan modification can raise your payments as well.
There are certain criteria which should be kept in mind while applying for a mortgage modification. Borrowers can apply for a loan modification if the lender hasn't declared a foreclosure. Borrowers should be delinquent on their loan payments for at least a month. The property should be in good physical condition when the borrower applies for a loan modification. Moreover the loan should have been originated for more than a year.
The borrower should write a hardship letter to the lender in order to apply for a mortgage modification. In this hardship letter, the borrower should inform the lender about his hardship which resulted in the non-payment of the mortgage dues. If the lender is convinced, he will accept the borrower’s request. The borrower can also take the help of a loss mitigation expert who will negotiate with the lender regarding the loan modification.
With the recent downfall in the real estate market, lots of people are facing issues regarding their mortgage payments. Loan modification offered by the lenders is a sort of bailout program for these people. This helps them in saving their credit and their home.