How Does the Mortgage Loan Modification Concept Work?

Loan modification programs have been designed to help a home owner repay their mortgage at a lower rate and avoid foreclosure. These loan modifications are a new agreement between the mortgage holder and the home owner. Unlike refinancing, loan modifications are a re-issuance of the current loan under new terms.

Many mortgages recently were made without the prospective home owners fully understanding the terms. Now, as the interest rate increased or the full amount is due each month, the owners find they can not make their payments. To avoid foreclosure these home owners can apply for a loan modification in the hopes of creating a repayment plan that they can afford and the mortgage company will accept.

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Another large issue in this area is unemployment or under employment. Many people have lost their jobs in the last year and have had to accept employment at a much lower wage. Since their original mortgages were calculated at their former pay rate, they can no longer meet the repayment terms. Loan modification is a great resource for these people to utilize. By applying for a loan modification because of the change in circumstances the home owner can avoid foreclosure.

Loan modifications are considered a new loan and agreement. Once you are approved for a loan modification your mortgage is considered current and your credit score will reflect this change. You must stay current from that point on or you will find yourself facing foreclosure again. Loan modifications are often a one time only deal and you will have little luck changing the payments again.

Even if you are on the brink of foreclosure or the beginning stages of the foreclosure process you can still apply for a loan modification. This may be your best chance in saving your home. Mortgage lenders want to keep you in your homes. It is better for them financially to have you paying a lower payment then to receive no payment at all. Overall it is a brilliant program that benefits both borrower and lender.

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