What is a Loan Modification?

A loan modification occurs when a borrower contacts his/her lender to initiate negotiations in an attempt to change the terms of the loan agreement.  The borrower attempts to negotiate a lower monthly mortgage payment, reduce the annual interest rate, and/or decrease the loan balance.  The reader should note a loan modification does not normally include a reduction in principal.

If a borrower is successful during the loan modification negotiation process they will obtain a lower interest rate and/or their monthly payment.  The lender is able to do this by granting the borrower a longer period of time to pay off the principal (i.e. a 30 year mortgage now becomes a 40 year mortgage). 

Banks transact loan modifications daily.  Therefore, when an individual approaches a lender/bank for a loan modification the lender is motivated to offer the borrower the best plan they can negotiate in favor of the bank.  Since the lenders are dealing with borrowers on a day-to-day basis they have become highly skilled in negotiating favorable rates for the bank.  Thus, MortgageForeclosureReport.com suggests  when approaching a lender for a loan modification it is important to seek legal counsel.  A lawyer is a professional negotiator who deals with the problems from the borrower’s perspective on a daily basis.  They will attempt to obtain the best results possible.  This may include lower monthly payments, a possible reduction in principal,and/or a reduction in annual interest rates.  If you decide not to utilize a lawyer we believe it is in your best interest to take advantage of a reputable lawyer’s free consultation.