What is A Mortgage Loan Modification?

by tammy on February 27, 2010

Mortgage loan modifications can be extremely helpful when one finds himself behind on mortgage payments or in a great amount of debt. Many people get bogged down with all the jargon and technical talk that is often used when discussing loan modifications, and they are unable to understand the process. It is, in acutality, quite simple. When one finds himself unable to repay a loan, the borrower may then change or modify the balance owed, the interest rate being paid, or even the period of time one has to repay the loan. These changes are meant to provide relief and support to the borrower, and if one goes with a legitimate company, they do just that. If one chooses a shady dealer, he might find himself even more in debt! Following a few simple steps and doing a bit of research can save borrowers from this all too common fate!

While one may use a third party or outside site or service to help him get a loan modification, it is important that the process is always done with the help of an attorney. The attorney can adequate review an individual’s exact circumstances and the legal and financial limitations of the loan itself. One should always be sure that every step of this process is explained to him and that he thoroughly understands it. Ignorance can cause mistakes and end up costing the client valuable time and money! It is also no excuse for not making payments on time or for ending up paying more than one has need to pay.

It is also important that the lender understand that a mortgage modification is not a way out of paying back the money he owes. Some individuals mistake this process for a way to stop paying or to only pay back part of their loans. This is not the case – the amount will be paid off in full and sometimes the amount may end up being more than it was in the first place. Generally, there will just be a few helpful changes made that allow one to have more time to pay back the loan. Common steps that are usually taken in a normal mortgage modification plan include reducing one’s APR with the actual amount of reduction variable; adjusting the prinicpal mortgage amount to the current market value or to a lower price; making the payment one has to make smaller and more spread out.

Mortgage loan modifications are not for everyone, but they can be helpful for many, many people. It is vital that individuals consider all the other ptions open to them before going the route of a loan modification as this is a long process and does not always reflect favorably on one’s credit. Following a budget and reassessing the amount one is spending in other areas may be an alternative to this process, but if it is not, one should be sure that he finds a legitimate and reliable company and understands all the negotiations and changes that are being made.

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