What is a Loan Modification?

A loan modification is a permanent change to a home loan that is agreed to by both the lender and/or the mortgage servicer and the borrower. Lenders and mortgage servicers modify loans to help homeowners in a time of hardship. There are numerous types of hardships that qualify borrowers for a loan modification.

In any case, the goal of the loan modification is to make the home loan affordable for the borrower in the long term. A typical loan modification may result in a permanent, reduced fixed rate or a temporary interest rate reduction. In addition, some lenders may agree to reduce the principle balance of the loan as well.

In the past, loan modifications used to only be given to borrowers when they were behind on payments and if they had serious hardships such as loss of employment, illness or death in the family. Now there are many lenders that are willing to modify the terms of a home loan due to unaffordable interest rate adjustments or simply a change in income.

How do you know if a loan modification is a good option for you? First, you must know that you will have to describe to your lender your hardship. Documenting a hardship is the second most important aspect of the loan modification next to the borrower being able to afford to make modified payments. Even if your hardship is not permanent, the most important aspect of the hardship is that it must be documentable.

Here is a list of hardships that justify a loan modification:

1. Adjustable Rate Mortgage Reset-Payment Shock
2. Illness of the Borrower
3. Illness of a Borrowers Family Member
4. Curtailment of Income
5. Loss of Job
6. Abandonment of Property
7. Property Problem
8. Inability to Sell the Property
9. Inability to Rent the Property
10. Mortgage Servicing Problems
11. Transfer of Ownership Delays
12. Reduced Income
13. Failed Business
14. Job Relocation
15. Death of the Borrower
16. Death of Spouse or Co-Borrower
17. Death in the Family
18. Incarceration
19. Divorce
20. Marital Separation
21. Military Duty
22. Medical Bills
23. Damage to Property (natural disaster or unnatural)

Please call Consumer Loan & Debit Solutions today for a free consultation with our Specialists to find out if you are a candidate for a loan modification.

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