How to prevent foreclosure - Loan Modification

A loan modification is a change of the original note to assist the borrower with a temporary hardship. 

A lender may consider a loan modification if the borrower is unable to make the regular mortgage payments and back-payments (forbearance), but would be able to keep the loan current if the loan was modified. 

The loan modification could include:

• Decreasing the interest rate
• Extending the term of the loan and therefore number of payments made.

Loan modification is a sensible option for borrowers who have a temporary lapse in income or employment, which has been resolved.  Loan modification will not help those with mortgage arrears (who will not be eligible) who have lost their income or jobs (unresolved) or have significant negative equity (a loan bigger than the value of the home).

Unfortunately, lenders are reluctant to approve loan modifications in the vast majority of cases.  However, upon denial, if a short sale offer is submitted to the lender, they will often reconsider the loan modification request and make their best offer.  The reason for this is that a short sale will result in a greater loss for the lender than a loan modification.  Regrettably, most loan modification companies do not understand how to manage these issues appropriately and are not achieving desirable results for their clients.

Homeowners who are not obtaining the results they want should seek specialized assistance to help them resolve this important financial issue in order to avoid foreclosure and improve the family’s finances.