Mortgage modifications exist to enable a distressed homeowner to avoid foreclosure. This is accomplished by changing the original perimeters of the loan arrangements. This modification can consist of an array of options that are intended to lower your mortgage payments for the remaining life of the loan. These adjustments are not deferments but permanent changes to your mortgage. These adjustments will often consist of converting an inflated variable interest rate into a lower fixed interest rate. Another common way to lower payments is to re-amortize your mortgage, extending the terms of the loan. In order to obtain a modification you will need to compose a hardship letter and complete several other documents that will explain your hardship and your future ability to repay. It is important that you apply for a mortgage modification as soon as you become default on your mortgage. The longer you wait and further you get behind on payments the less likely the loan agency is to work with you on an adjustment. They will want to see that you have the ability to pay the new terms. It is never a good idea to purposely default on your mortgage in hope of getting new arrangements. While the bank will want to see that you have an ability to pay new arrangements they will not issue you a modification if they believe you can afford the current arrangements. ADVANTAGES: A successful Loan Modification will supply you with the following: 1. an interest rate reduction up to 6% 2. The advantage of having the reinstatement amount (total amount of late payments) deferred to the back end of the mortgage and added to the current principle. 3. A reduction in the actual principle balance of the loan 4. Has many of the same features of a refinance, without the high cost. DISADVANTAGES: 1.You only get one shot at the Loan Modification so you need to get it right the first time. It is important that you make sure your mortgage modification sets up payment perimeters you can afford. 2. Your mortgage company does not earn money making you modifications so they will most likely offer you terms that are not actually helpful. 3. Due to the high rate of foreclosures there are an abundance of scams out there set up to take your money, that promise to help you with negotiations. To avoid these scams NEVER PAY A DOWNPAYMENT TO ANYONE OFFERING TO ASSIST IN A MORTGAGE MODIFICATION. A mortgage modification can be a very useful defense to avoid foreclosure you should strongly consider the above advantages and disadvantages if you are in fear of loosing your home.
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