Home »
Blog » Foreclosure Crisis » Foreclosure Solution: Familiarize Yourself with Mortgage Modification
Foreclosure Solution: Familiarize Yourself with Mortgage Modification
February 12th, 2009 by 
Joseph Smith
Mortgage modifications are created to save homeownership, but sometimes, it has “buyer bewares”.
The increasing demand for loan modifications has been brought about by the increasing number of foreclosures or by the increasing number of homeowners who are not able to keep up with their monthly mortgage dues. Also, this great demand stems from a lot of foreclosure relief and bailout programs by public and private lending industries.
Mortgage modifications have already existed for a long time but it is only now that they have become proliferate as it is being used as an alternative to short sales, auctions, foreclosures, and bankruptcy. These mortgage modifications are usually voluntary and are on a case-by-case basis that is why there is no standardized procedure.
It is important to familiarize yourself with mortgage modification to help you in your tough situation about your home. First question, what is a mortgage modification?
A home loan modification is reworking on the current loan’s terms to make it more affordable for the distressed homeowner. It is granted only upon the existing lender’s approval.
These modifications are lender fee-free plus the loan holder lowers interest rate or changes an adjustable-rate mortgage (ARM) into a fixed rate mortgage (FRM) with a 30-year term. Also, included here is a mandated home counseling.
Other loan modifications comprise extending loan term and adding missed payments to the loan balance, and sometimes, the lender reducing the principal or wiping out any second mortgages. It is not a refinanced mortgage.
Now, is a mortgage modification for you? Well it is not for everyone. Here are cases when a loan modification is not viable:
- The loan has payments you cannot afford.
- You currently have low interest rate that the lender has no room to lower it further.
- You can afford the new payments but your loan balance has greater value than your home and you do not have plans of staying longer to reverse the loan-to-value imbalance.
- You have not missed any mortgage payments or show financial hardship such as job loss, illness, or interest rate increase.
- You still have existing assets or properties that could be liquidated to use as payment for your mortgage debt.
- Sometimes, a short sale, and auction sale, refinancing, auction sale, or a short of a foreclosure is still a better option.
A financing, credit or housing counselor could help you determine whether you deserve a loan modification. By waiting for a couple of months, you can find your way out of foreclosure.
