Loan Modification Questions and Answers

What is a Loan Modification?

A loan modification is the procedure whereby a loan’s payment plan is changed, due to the hardship of the borrower. This may include changes to the rate, the term and the monthly payment amounts. In rare cases, the principal amount may be reduced.

This process is handled through the lender’s Loss Mitigation Department.


Why Would a Lender Agree to Modify Someone’s Loan?

It’s simple. Foreclosures are at an all time high. Banks cannot afford to own many foreclosed home assets. Banks are in the business of lending money, not owning property. When they own property, their money is locked up and they can't lend it out, so banks lose money on foreclosed homes in almost every case. With this in mind, now is a great time to request a loan modification for your clients, if they have a verifiable hardship that could otherwise lead them into a foreclosure situation, and if they wish to stay in the home. The loan modification option saves the homeowner’s home from foreclosure, helping both the homeowner and the bank.

How Does the Homeowner Benefit?

For the homeowner who wishes to keep their home, the Loan Modification is the solution, regardless of their current equity or credit situation. Different than the short sale, the homeowner stays in the home. Ultimately, the result of a Loan Modification is the borrower more easily and consistently makes their mortgage payments. This allows them to stay in their home and preserve the American Dream for themselves and their families, avoiding what has been dubbed, the ‘American Nightmare’ of losing their home to foreclosure.
Furthermore, a Loan Modification will not contribute to the decline of the local housing market, takes less time and effort than a short sale and is better for the homeowner’s credit. In many cases, a Loan Modification can close in less than 30 days, assuming the system has been followed as we present in this guide, and the homeowner qualifies

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