Mortgage Loan Modification - How does it Work?

The mortgage loan modification is very similar to a mortgage refinancing arrangement. The main difference is that in a mortgage refinancing you take out a new loan, whereas in a mortgage modification you modify your repayments of the original loan.

In a mortgage modification you simply change the mortgage loan repayment terms. These can include the amount and periodicity of repayments or repayment holidays for sometime.

A timely modification of your mortgage can help you protect yourself from a mortgagee sale or foreclosure if you can not keep up with your repayments. By reducing your monthly repayments, getting the loan repayment period extended or stop paying installments for some time can help you regain financial stability.

The mortgage modification process can be a very confusing and frustrating exercise specially when you are about to lose your home or investment property.

Before contacting your lender for modification of your loan you need to be prepared and able to present your case in a logical manner. It is important for you to understand how the process works.

Question - Can the lender include late charges in the Loan Modification?
Answer - According to the federal plan the banks have been directed to waive off any late fees and administrative charges /penalties when modifying the loan.

Question - can you explain the new government program and how will it help me to apply for a loan modification? 
Answer - The Federal government has allocated $75 billion dollars towards mortgage loan modification subsidize s. The banks now have a monetary incentive to help qualified borrowers to modify their loans.  In addition if you make re-payments on time will qualify for up to $5000 credit to reduce your loan balance.

Question - What are the criteria for me to become eligible for modification of my mortgage?
Answer - The main criteria is your ability to repay the loan as per the new re-payment schedule. You need to give to the lender your complete financial information including your proof of your income and expenses to show them that you will be able to meet your financial commitment.

Question - Do I have to be late on my mortgage payments in order to qualify for a modification of my loan?
Answer - No, you do not have to be late. The aim is to help borrowers before they fall into default. However, your chances of modifying your loan are higher if you’re already late in your payments.

Question - Will my hardship situation help me to get priority approval?
Answer - Every one has a unique story as to why they are behind on their home loan. Some of the acceptable reasons for the lenders are job relocation, divorce/separation, military service , death of spouse, loss of income, illness of co borrower or family member. You must include a compelling hardship letter with your application to improve your chances of success.

Question - Will mortgage modification help me avoid foreclosure?
Answer - Most definitely. If you work closely with your lender you will be able to find a satisfactory solution.

Question - Can I add my arrears into my new loan modification?
Answer - Definitely, the missed payments can be added to the modified loan and repayments can be spread out over the new loan term.

Question - Can I apply directly for modification of my mortgage or do I need help of professional services to represent me?
Answer - This will depend on your comfort level of dealing with your bank.  There is no point in hiring someone specially if your financial circumstances are bad. You can easily learn about the process on what it takes to get your application approved.  You should do your home work and then contact the bank's loss mitigation department or a loan modification company.

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