Loan Modification. It's Childs Play

Loan Modification Process Made Easy

Loan modification sounds intimidating to the average homeowner but the process is indeed simpler than you might think. We have tried to break it down in simple terms so you can better understand the process. Ultimately, a successful loan modification requires an agreement between the homeowner and the lender on the new terms of the loan causing both parties to become better off after the transaction. Below are what is required for each party.

For The Homeowner

Three elements must exist to make a homeowner a good candiate for loan modification:

1. Desire to Keep the House
2. Experienced a Financial Hardship
3. Income/Employment - Able to continue making lower payments
   

For The Lender/Servicer

Lenders and mortgage servicers each have their own loss mitigation departments and policies, but what is clear is that no lender wants yet another house to enter foreclosure, specially with all of the recent government incentives and assistance. As such, given foreslosure the alternative, as long as the homeowner can still make payments on the loan, the lender would be willing to work with him/her to prevent a foreclosure. Typically, lenders' requirements are to make sure that the deal makes fiscal sense. For example, they must determine that the revenue lost in lower payments on the loan would still be better than the cost assosicated with the foreclosure and maintenance of the home after it is taken back to the bank. In certain situations, this really gets down to bad vs. worse for the lender, but as a general rule, it is always better to let the homeowner keep his/her home and not take the house back. Obviously, the bank is not going to do something that is not in the best interests of the bank. Sometimes, it makes more sense to foreclose on the house. A good example of this is a borrower who would still be unable to pay a reduced mortgage payment due to a reduction of income or loss of job. In this situation, the bank realizes that they are not going to get paid since the borrower is not making enough money to cover the mortgage payment and other living expenses.