A loan modification may be a permanent change to a loan contract agreed to by both the lender and therefore the borrower. This is not a refinance, simply an adjustment or change to an existing loan in an effort to help the homeowner in a time of document able hardship. The ultimate goal is to make the loan affordable for the short or long term based on your hardship. Typically loan modifications come in the form of a rate reductions and fixing the interest rate for a certain period of time or a duration extension in which the loan is extended back to the original length or sometimes up to 40 years. Until recently, loan modifications were only given to borrowers when they were behind on payments and had document able hardships such as loss of employment, serious illness or death in the family. Times have changed and now borrowers are able to get loan modifications from lenders because of various reasons, many times simply a rate adjustments have made the loans affordable.
By starting the loan modification process earlier rather than later does help borrowers obtain the most favorable terms. The reason is once you reach default status you may be faced with a possible foreclosure of your home and this imminent sale may force you to take on a less appealing offer when many options and time are not on your side.
If you’ll afford your home but you only can’t afford the terms of your mortgage then a loan modification may alright be perfect for you. An important question addressed altogether loan modification submissions is that the existence of a documentable hardship. Even if the hardship is temporary, the foremost important aspect of the hardship is that it must be provable.
These are actual examples of hardships that get modifications approved in many circumstances:
Illness of the Borrower
Loss of Job
Abandonment of Property
Mortgage Servicing Problems
Transfer of Ownership Delays
Death in the Family
Damage to Property (natural disaster or unnatural)