Mortgage Modification Tips

As a result of the general economic upheavals and following on recent developments in the housing market there has been a lot of discussion about loan modification and loan restructuring. Most people have heard these terms but do not really know what they are all about. Here is an overview of the loan modification process and what it entails.

Loan modification and loan restructuring is generally the same thing. Modification refers to a situation where the bank or other lender agrees to a change in your loan terms so that you will have an affordable mortgage payment. The idea of restructuring is that it will help avert foreclosure by bringing past due payments on the loan current and providing for a payment you can manage month to month. In order to qualify for a loan restructuring, you will have to show exactly what your current financial position is. The lender will ask to see documentation of your income and expenses. This is so they can see what new payment amount you can afford. You will also need to show that you are in a hardship situation.

If you fell behind due to medical expenses, divorce, job loss, or some other occurrence that influenced your ability to pay your mortgage on time, you should explain the details of the situation in writing. You will need to be prepared to prove everything about your situation by way of documentation, so make sure you have all of your paperwork in order before heading for the meeting with the bank. You may be wondering what the government’s role in this is.

The federal government program offers incentives to lenders who offer restructuring of home loans. This means it is to the bank’s advantage to work with you on the terms of your loan. There is also a tax advantage for the homeowner in that a credit on federal taxes will be available for those who continue to make their payments on time as agreed.

It is a win-win situation in that both the homeowner and the bank stand to gain. The homeowner, of course, gets to avoid foreclosure and stay in the home. Is this for you? It all depends on the specifics involving your lender, your income, and the particulars of the hardship. Once you understand how the loan modification process works, you can decide whether it is something you want to pursue