Mortgage loan modification 101

What is a loan modification?

What is loan modification? Many have been wondering this.

Those that are currently dealing with the very serious issue of home foreclosures have been looking for help. Some have come across mentions of the ability to modify home loans. Since most people are not familiar with lending laws they may have several questions regarding what exactly it is the process of loan modification.

Probably the best single word to describe it would be a “blessing” because this process is, for many, the only means in which they are able to hold on to their home.

In terms of the specific definition of what this process is loan modification refers to the negotiated agreement between the lender and the borrower (or the borrower’s representative) where the original terms and conditions of the loan have been reworked.

In particular, they are reworked so the borrower can now afford the payments and remain timely on all monthly obligations. This has the very positive impact of preventing foreclosure from occurring. This helps out both the borrower and the lender since no one wins out when foreclosure proceedings are initiated.

The interest rates could be lowered and, in many cases, it is outrageously high interests that are the reason for borrowers falling into arrears.The monthly payment could be lowered to a more affordable amount and this is often extremely helpful to those that would be able to stay current if a few hundred dollars were removed from the monthly amount. Really, there is no limit to the specific terms of the agreement that can be altered.

Some may wonder if this process is so easy why has so many individuals slipped into foreclosure. The answer is that the rules surrounding loan modifications have only recently been enacted.

The origination point of these home loan modifications was the TARP fund which was intended to help troubled banks achieve liquidity and refuel their ability to lend.

A portion of this money has now been earmarked to support the modification of these loans. Without this federal support, the banks would not have the ability to finance such ventures.

Hope for homeowners

For many, the answer to what is loan modification is that it is the last hope for homeowners. Without the new regulations that make this law possible, many people would have lost their home to foreclosure.

The modification of their original loan agreement has presented the necessary breathing room to once again achieve the financial stability their need.