Can You Find Debt Relief with Loan Modification Programs?

Like a refinance of your mortgage, a loan modification program is designed to change the terms of your existing mortgage loan so as to give you more affordable payments.  Loan modification programs can be quite beneficial to homeowners who have encountered some sort of financial hardship and are unable to make their monthly mortgage payments.  Given the current economy, the majority of major mortgage companies now offer some sort of loan modification program for struggling homeowners. 

Qualifying for a Loan Modification

While all mortgage lenders have different eligibility requirements, there are some common factors that may qualify you for a loan modification:

• You are currently suffering an economic hardship or change in financial circumstances;
• You primarily live in the home secured by your mortgage loan;
• You have not filed bankruptcy proceedings;
• You are at least ninety (90) days delinquent in your monthly mortgage payments; and

• You have sufficient income to make modified mortgage loan payments.

Applying for a Loan Modification

You should contact your mortgage lender to see what loan modification programs are available, and what you must do in order to apply for any programs for which you may be eligible.  In most cases, you will need to complete a loan modification application provided by your lender, as well as the following information:

• A written explanation of the financial hardship that you are experiencing;
• A detailed account of your monthly expenses; and 
• Proof of your household income.

Benefits of a Loan Modification

From your mortgage lender’s perspective, a loan modification is preferable to you simply defaulting on your mortgage loan because it is a less costly alternative to the foreclosure process.  Given the current economic climate, with foreclosure rates soaring, banks must mitigate their losses to the greatest extent possible.  For you as the homeowner, you may experience the following benefits of a loan modification, depending on your lender’s program:

• Reduction of interest rates;
• Monthly principal reductions; and/or 
• Other incentive payments.

Consult an Attorney

If you find yourself having difficulty making your mortgage loan payments, you should consult an attorney in order to explore all of your available options, including loan modification programs that your mortgage lender may offer.  An attorney can assist you in choosing the option that is best for you and your situation.