Loan Modification is a term used when a Lender agrees to modify or alter the original terms of a loan.  This terminology is, as of late, most commonly used to refer to a home mortgage.  And, of course, the purpose is to make the overall structure of the loan more affordable to the borrower.

There are a variety of ways a loan modification can be accomplished.   The interest rate can be reduced, either temporarily or permanently.  Also, what was once an adjustable rate loan, otherwise known as an ARM, could be changed to a fixed rate loan.  Further, an interest only loan (one where the monthly payments are only paying the interest every month, not towards any principle reduction) could be altered to include interest AND principle. The Term of the loan (which means, the length of time the payments are owed, until payoff) can also be changed. i.e. going from a 15 year to a 30 year loan, or from a 30 year to a 40 year loan. Further, the principle balance of the loan can also be reduced in a loan modification. Any of these ways (or a combination thereof) can be used in a “loan modification”.

In the current marketplace i.e. a declining market and an obvious sluggish, struggling economy, loan modifications are becoming commonplace. The quasi-government agencies of Fannie Mae and Freddie Mac (and the financial power players of many conventional loans originated in the U.S.) are now suggesting to banking institutions that loan modifications be performed for the sake of keeping homeowners in their homes. The benefit to the banks is that it will cost them far less in the long run, to loan modify an existing customer than it would cost to foreclose a property. The national average of cost per foreclosure is now running up to $60,000 per property, just for the foreclosure process. That doesn’t even count the losses on the principal/interest on the loan that the lender will have also taken. Obviously a lower monthly payment is the goal sought by the homeowner. In the end, with a loan modification, the homeowner wins with the lower monthly payment, the bank wins (or is less scathed) when it save itself the cost and trouble of foreclosure. Further, the market overall wins, due to less short-sales and foreclosure on the market, which ultimately brings down the comparables in the neighborhood, and therefore home values overall. In order to find out about loan modification specific to the lender/bank that currently controls your loan, click on the following link which will take you to a website I have directed many clients to during these troubled times. From there, you can find your banking institution and further click on the links to begin inquiring about the loan modification.

http://www.homeloanlearningcenter.com/ForeclosurePreventContactInfo.htm

Further, should you have specific questions about the process, I would be happy to answer any questions. My services and advice are free of charge. I currently have several clients, friends and family who are going through this process themselves, so have garnished knowledge from the processes they have been going through.