With the increase in the number of foreclosures an increasing number of the borrowers are turning to loan modification programs. Working with your lender, loan modification can prevent foreclosure and also help you in save some cash.

What is loan modification?
Loan modification, also referred to as mortgage modification, is a renegotiated contract between you and your lender, wherein the lender agrees to make certain changes to the existing terms and conditions of your mortgage loan. However, you have to give documented evidence of the circumstances preventing you from making current payments.

The main aim of loan modification is to allow you to make payments for your mortgage as adjustments in rates, or life circumstances, have made it difficult for you to repay the loan.

When can you apply for loan modification?
You can apply for mortgage modification if conventional refinancing options are unavailable-like when the principal you owe is more than the current market value of the property-and you want to stop foreclosure. If you are in a reasonable financial position to retain your home with lower payments, loan modification might be a good option for you.

When are you eligible for mortgage modification?
Loan modification may sound too good to be true but in reality it has helped many borrowers from losing their homes. You need to qualify for the program. You might be eligible if you meet some of the following criteria.

1. At least a year should have passed since the date of loan origination.
2. Payment shock due to changes in ARM.
3. You should be occupying the property as primary residence.
4. If you have missed at least three payments.
5. If you fall sick.
6. Property abandonment.
7. Unemployment.
8. Your income gets reduced.
9. Marital separation.

How does a loan modification work?
The modification process starts with your lender. When an agreement is signed between you and your lender and if the lender finds you to be eligible for the loan modification program, he refers your mortgage modification to the loan processing division. However, it takes some time before you can avail the changes in the terms of your existing loan. The lender may agree to adjust your interest rate, repayment term, or principal balance. Remember that the goal is to keep you out of foreclosure.

What are the legal aspects of loan modification?
It is better if you get the loan modification program carried out in presence of an attorney. Legal professionals are efficient in handling such situations. And if you try to handle it on your own there are chances that some unscrupulous “consultants” may take you for a ride.

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