Benefits for Choosing Mortgage Loan Modifications

by tammy on April 16, 2010

If done correctly, a mortgage loan modification can be a great option for many individuals who have found themselves in debt and unable to pay their bills. Loan modification is, as the name implies, and adjustment to the terms of one’s mortgage loan. Depending on the terms of the settlement, debtors may be able to change how much their payments are, when their payments are due, or other key conditions of the loan. They must prove documented financial hardship in order to qualify, and the loan will still have to be paid off in full eventually. Though this is not a fun process by any means, loan modification can bring about some wonderful benefits.

One of these benefits is the avoidance of foreclosure. The impending possibility of foreclosure, or the forcible loss of one’s home, is one of the most common reasons that debtors consider loan modification in the first place. What many people don’t know, however, is that loan modification can stop foreclosure even after the process has been started. As long as debtors act quickly, advisably no longer than a day or two after they receive notice of an impending foreclosure, the process can be reversed or called off.

Another great benefit of the loan modification process is that the debtor’s credit score can be redeemed. After a foreclosure, credit ratings drop very low and are almost impossible to recover. With a loan modification, however, depending on how the collection agency reports the loan modification, the debtor’s credit score may be only minimally impacted or not impacted at all. Even if one does receive some sort of mark on his or her credit score, making payments on time can help to bring the score back up. The damage done to a credit score by a loan modification is a lot less than the damage done by having a foreclosure on one’s record.

Loan modification is beneficial to the lender as well. When a house or property is foreclosed on, lenders do not get any amount other than the cost of the house. They are directly responsible for paying for the fees associated with relisting the house and selling it as well, so they lose money with foreclosure. With a loan modification, lenders still receive all the money that is due to them, though it is usually spread out over a longer period of time. This arrangement makes lenders more willing to do loan modifications and causes everyone to end up happy.

While loan modification may not be for everyone, it can be a truly wonderful option for some individuals. It is extremely important, however, that debtors go through the loan modification process with a legitimate loan modification company or a trustworthy lawyer or other professional, so that they do not find themselves in a new kind of debt all over again. If researched properly and done correctly, loan modifications can bring about very positive changes in the lives of those who are having money difficulties.

Leave a Comment

Previous post:

Next post: