Loan Modifications, what are they?

Loan Modifications, what are they? Many are behind on their payments, and can’t refinance because their mortgage balance is more than their home is worth. Or, their existing mortgage is due to adjust, which will cripple them financially if some action isn’t taken. But there’s help. Loan modification companies mediate between borrowers and lenders, especially regarding mortgage loans, in cases where the borrower is unable to repay the loan in the time prescribed in their original mortgage. So what is a loan modification? Essentially it’s a long-term solution to help homeowners make their Payments, and stay in their homes. This can be done by decreasing the interest rate, or if it’s an adjustable rate mortgage, changing it to a fixed rate. A loan modification can also be a lengthening of the period of time the borrower has to pay back the loan, or switching to a different kind of loan. This is beneficial to the borrower because it allows the individual or family to stay in the home and the modification results in loan terms that work better for their lifestyle or situation. Loan modification is also beneficial to lenders because they lose more money in a foreclosure. This new refinancing option gives creditworthy homeowners, who were making timely mortgage payments before their loans reset but are now in default, a second chance with an FHA-insured product. The next alternative would be to decrease the interest rate. Most lenders are willing to decrease the rate for qualified applicants. Another option is to have the payments the borrower is behind on added to the principle of the loan which is then re-amortized. Another course of action maybe a Short Sale, they can negotiate the sale of your property for less than what you owe on it and relieving you of the difference. If a client is already in foreclosure, they can still jump in and help. In many cases a Loan Modification Company can even save your credit rating.