Mortgage modification changes your original mortgage agreement. It is typically done to help make the mortgage repayment process easier for homeowners. Modification lowers monthly mortgage payments and can prevent default if you are struggling financially. Banks offer or grant loan modification requests because it is in their best interest to help you repay your loan.
Homeowners who are no longer able to afford their mortgages are sometimes offered mortgage modification from their current lender, another lender, or through a government program. Lenders offer loan modification to prevent the need for foreclosure or other attempts at collection. If you are unable to make your mortgage payments, the bank can foreclose, attempt to collect through wage garnishment, accept the loss, or wait until you declare bankruptcy and receive a portion of the original loan.
None of these options is ideal for the lender, so they offer the option of modification to adjust the terms of the loan. The change in interest rate reduces the homeowner’s monthly mortgage payments to an affordable amount, but since the terms of the loan are changed, the bank does not lose money in the long run. As a matter of fact, a lender might end up making more on your loan because of modification.
Beware Refinancing and Modification Offers
Keep in mind generic offers to modify your loan (often mailed to homeowners and marketed as a refi or refinancing offer) might be a gimmick. Even if an offer comes directly from your current lender claiming you qualify for modification, you can still be denied, even if you are in good standing on your mortgage. This is why it is helpful to work with a professional who understand the modification process.
Requesting a Mortgage Modification
If changes in your life have occurred since you purchased your home and you are no longer able to afford your mortgage payments, but your lender has not yet offered a modification, you can request one. Contact your lender and explain your financial situation. Criteria for approving a modification request vary from lender to lender, so it is important to get detailed information about your situation and determine whether or not a modification is beneficial.
Before committing to a mortgage modification, make sure you understand the terms of the new arrangement. Modifications can be temporary or permanent. If your goal is to reduce your monthly mortgage payments, you might end up paying more in interest in the long run, but the adjustment can prevent foreclosure or free up cash to help with other debts.
It is a good idea to work with an attorney who understand the modification process and can help you determine your best course of action. Modification might also be available if you are in the process of filing bankruptcy. If you have filed for bankruptcy and you are interested in mortgage modification, speak with your bankruptcy attorney.
If you are concerned you are headed toward foreclosure or you have questions about mortgage modification, contact the Law Offices of Robert M. Geller at 813.254.5696