Many people might be wondering, how does a loan modification work? This question is an important one in moving forward with any attempt to save their home. Get a misunderstanding of the process and you could find yourself down the road of total disappointment. Which brings me to the point of this article, within which I’ll outline the fundamentals of the modification process.
The Basics – What is a Loan Modification? The process of modifying a loan involves changing the terms of an existing loan. It is one of the key strategies adopted by lenders and borrowers alike under the general umbrella of loss mitigation. Typically, a loan can be modified on the basis of a reduced interest rate, an extension of the loan term or a reduction of the principal amount loaned. And if you’re lucky, sometimes you might be able to get a combination of these towards your modification.
Popular Loan Modification Programs – HAMP The recent financial crisis has caused a lot of families to face hardship and as a consequence face the threat of losing their homes. To combat this the Obama administration enacted the Home Affordable Modification Program or HAMP for short. The principles of HAMP or the same as most modification programs except that it has federal backing and a
few additional criteria for qualification.
In order to qualify for a HAMP loan, you must prove that the loan you are trying to modify is related to your primary residence and also that your monthly mortgage payments exceed your gross monthly income by at least 31%.
Help With Modification – #1 Tip Many people undertake the laborious process of applying for a modifying loan themselves. Often, most applications will fail because of a poorly drafted hardship letter (a requirement). Of course failure like this can be avoided if you enlist the help of a qualified loan modification company. Once you hire such a company, all you do is provide your basic information and they’ll do the hard work of drafting a winning hardship letter and compiling the necessary form for submission.
Now that you have the answer to the tough question of how a loan modification works, you should be more confident about making a serious attempt to save your home. Like I said earlier, the process can be less burdensome if you seek out the help of a qualified loan modification company, most of which can be found online. To begin with, I suggest obtaining a free loan modification evaluation in order to determine the best course of action based on your financial situation.