Mortgage loan modification 101

 

Home Loan Modification

For many, a home loan modification is the only reprieve to a terrible situation. When facing the threat of foreclosure, it is important to stress the fact that there are ways of dealing with the situation.



The ability to modify a loan can reverse a number of the problems a person may face in the aftermath of falling into default. However, it is also necessary to stress the fact that these types of home loan revisions require certain criteria to be met in order to be approved.

Thankfully, the criterion that must be met is not too significant that it is unattainable. However, a clear explanation of these criteria is needed in order to understand what might be required. 

Refinancing home loans

Home foreclosure Process

Loan Modifications


First, it is important to point out that loan modifications are not the same as refinancing a loan.


Refinancing involves acquiring a new loan from the original lender with the express purpose of paying off the first loan. This can be done to lower monthly payments or interest rates. However, receiving a new loan via refinancing is hardly a guarantee as you need to apply for such a loan.

For those that may be behind on their mortgage or have suffered declining income or have developed a bad credit rating, the ability to refinance the loan becomes impossible. This is because the borrower is not considered a good borrower. This then puts the borrower closer to foreclosure if the inability to alter the current loan becomes an issue.

New Home Loan Modification Rules

This is one reason why new loan modification rules have been enacted. These rules provide a way to help both the borrower and the lender through avoiding foreclosure. Foreclosure can negatively impact the business of the lender and that is why most banks revile having to launch foreclosure proceedings. However, a lender will certainly foreclose when payment has not been received and the lender will refuse refinancing if the individual’s a poor applicant.

Federal Laws to Protect Homeowners

Federal laws are now crafted that compels lenders to engage in home loan modification under certain circumstances. Specifically, the borrower needs to prove that he/she legitimately is unable to make payments and can do so if the loan has been effectively modified.

That means the individual must be able to prove proper gainful income or employment that would clearly show the ability to make payments once the new loan terms have been instituted. After all, it would not be prudent for a lender to modify terms and then the borrower was unable to make payments.

The importance of a loan modification attorney

The process of applying for these types of loan modifications is not as easy as some assume. This is not to say the odds are completely against you. It is just to point out that the lender also needs to maintain its own interests or else its contracts would not be of much value.

In order to ensure your loan modification program is properly handled, it is best to turn over the negotiation of such home loan plans to a qualified attorney who understands the complexities of the situation and can ensure all paperwork is properly submitted and that on paper you look like a proper candidate for a home loan modification.