Mortgage loan modification

Mortgage loan modification tips, requirements, pros and cons

What is a mortgage loan modification?

Mortgage loan modification, also called debt rescheduling, is the fact of changing the terms of a mortgage from the agreements in the original contract. The new terms must be discussed and agreed by both the lender and borrower before the second contract can be signed and come into effect.

Mortgage loan modificationThe government home loan modification program helps homeowners convert an existing ARM into a fixed rate mortgage.  This means that you are basically doing a mortgage refinance on a bad credit mortgage without needing a better credit score.  Many credit scores have come down as people have encountered the inability to make their payments.  Mortgage loan modification is much more complex than regular mortgage refinancing, but if you are in a position where foreclosure is a very real possibility, this may be the program that will help you get through it.  This program was designed to help those whose only other option is foreclosure.

Mortgage loan modification requirements

In order to be eligible for a home loan modification, the first requirement is actually that you must have missed some of your mortgage payments in order to prove that you are struggling financially.  If you are having trouble but haven’t missed any payments yet, you may want to look into getting a bad credit mortgage refinance, which may be a better and easier option for you.

However, if you have missed payments and don’t see much light at the end of the tunnel, you have a short amount of time to contact one of the government agencies that handles loan modification, and if you don’t get the ball rolling fast enough, you may still end up going through a foreclosure.  You will have to attend a class or take a short online course so that they know you understand how it all works and whether or not you meet the guidelines for the program.  Working with a loan officer who is experienced with loan modification will help you avoid pitfalls or problems along the way.

Home affordable modification program pros and cons


There are many reasons why thousands of people in this country may be struggling to make their mortgage payments on time.  The economy has forced layoffs in many industries and businesses have tightened their belts and are not hiring as many workers.  You may have also suffered an illness that has left you with high medical bills to pay.  You may have been a victim of the subprime mortgage that allowed people to purchase a home that was above their means with a low rate that was greatly increased after a couple of years. home loan modification

If you got an adjustable rate mortgage at that time and are struggling to pay the higher monthly payments because your mortgage adjusted, the government has a home loan modification program that may not only help to lower that monthly payment, but may help you to be able to stay in your home if foreclosure is imminent.


There is no doubt that a mortgage loan modification offer many advantages, but there are also potential downsides to the process that you need to know before you sign the contract.

A home loan modification may affect your credit. The adjustment, including missing previous payments, may show on your credit report. However, the severity of the impact depends on how your lender reports it to the credit bureaus. You need to question your lender about this if you are building your credit.

There are also processing costs and legal fees involved. Most lenders will just add these fees to the principal of the loan instead of asking you to pay them directly. Additional fees, including late charges that have incurred prior to seeking the modification, may be added to the loan principal as well.


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