When you applied for your mortgage, you did so based upon your income and assets at the time. That was the same data that your mortgage lender used to approve your mortgage, and when all of the paperwork was done you knew exactly what your monthly payment would be. Though both sides entered that arrangement with the expectation that none of the basics would change, sometimes circumstances intervene and people fall on hard economic times. If that has happened to you, a mortgage modification may be worth your consideration.

A mortgage modification allows you to change the terms of your existing loan in a way that maintains the same debt, but makes it easier for you to continue paying it. There are a number of different changes that can be made to accomplish this, including extending the length your loan’s term, reducing the rate of interest on the money that you have borrowed, or simply switching from an adjustable-rate mortgage to a fixed loan so that you don’t have to fear your mortgage payment increasing. Unlike refinancing, which replaces your existing loan with a new one, a mortgage modification represents a negotiation with your lender to make it more affordable for you to continue with the existing loan.

Asking your lender to consider a mortgage modification is an intimidating proposition – homeowners fear that letting their lender know that they’re struggling to pay their loan may result in action being taken against them. The truth is that your lender would likely prefer to work with you than to take action against you. Banks don’t generally like foreclosure, which is an expensive, time-consuming process. A mortgage modification is frequently a much better answer for all involved.

Qualifying for a loan modification is not as simple as just asking for it. Eligibility requires that the borrower is either already delinquent or is about to be delinquent as a result of a job loss, the loss of a spouse, an illness or disability or some other verifiable reason for an inability to pay based on your loan’s existing terms. The resulting modification, if approved, may be a temporary fix or may make permanent changes to your loan, and may be facilitated directly by your bank or loan servicer or through an assistance program such as the Flex Modification program offered by both Fannie Mae and Freddie Mac to homeowners whose loans they guarantee.

Keep in mind that a mortgage modification may reflect negatively in your credit report, though certainly not to the same extent that foreclosure or delinquency on your mortgage would. To find out more, contact your bank or mortgage servicer to ask about the availability of a mortgage modification, or contact our office to inquire about how we can help.

 

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