In a nutshell, loan modification is an agreement between a mortgagor and lender to re-evaluate and reinstate terms and conditions of the loan. The main goal of this negotiation is to reduce the monthly payments that the borrower can afford. This is considered to be a better solution to avoid the mortgage loan predicament from escalating to foreclosure.
Loan modification benefits both parties. While mortgagors are given a leeway to make the payments, the lenders get more assurance of getting paid and save on conducting foreclosure proceedings. Because each foreclosure case takes 18 months to process and entails lenders to spend 25% of the loan balance, modifying loans proves to be a better alternative.
The economic recession has caused skyrocketing foreclosure cases in America. From January to September, 731,000 homes have been foreclosed by lenders. Most of these foreclosures occurred because borrowers are not diligent enough in contacting lenders about their financial status and ability to make the payment. In the end, the best solution to avoid foreclosure is ultimately to negotiate with lenders and find a middle ground by which both could benefit. Hence, loan modification is the panacea for foreclosure worries.
However, having loans modified is not a quick and seamless process. Although in the past, a delinquent mortgagor could get his loan modified just by telling a believable sob story about his financial situation, the crunch of the recession made things more tedious. Now, lenders are far tougher in conducting a background check about the borrower's ability to meet the necessary payments as agreed upon in the deal.
Lenders usually send representatives to check on the borrower's actual financial situation. It is much like an inspection and assessment of your qualification for loan modification. On the borrower's side of the bargain, he needs to have a complete and broad idea of his monthly financial flows. Upon contacting the lender, the borrower will undergo an interview about his loans. In a way, the borrower is going to present his proposal of interest rates alteration and changes in the terms of the condition of the agreement. Once these are done and approved by the lender, the borrower can evaluate whether the deal given by the lender is favorable for him. To put it strongly, the loan modification deal should save him from foreclosure for a longer period and not just for a few months. This is especially true for those mortgagors who are not just experiencing the crunch of the economic down-spiraling in terms of their home payments, but are already nearing bankruptcy.
In the face of foreclosure, no one should just wait for the economy to stabilize. A borrower's way out of losing his home is highly contingent upon his action and initiative in fixing the financial glitch. Considering the options of either selling the house or facing lawsuits, modifying loans is deemed to be a better alternative. Through loan modification, mortgagors can steer clear of looming home foreclosures.
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