Lenders may consider loan modification where most, or all of the delinquent payments and foreclosure fees are added onto the back end of the loan. Payments often can remain approximately the same. In some cases the interest rate may be reduced permanently.
The loan modification objectives of both the lender, and the borrower in the loan modification process happen to be the same. The goal is to design a repayment schedule that ensures the borrower can afford to pay their mortgage payments while being able to maintain their lifestyle. This means being able to pay other necessary living expenses including; car payment(s), food and groceries, utilities, gasoline, insurance, child care, clothing, home maintenance, property taxes, etc.
Who Qualifies For a Loan Modification?
The need to alter a loan can be caused by many factors, such as:
- The borrower having less income than anticipated (i.e. reduction in salary or loss of job)
- A family or medical hardship (i.e. illness or death in the family)
- A scheduled change in loan structure that the borrower wasn’t aware of or didn’t anticipate (payment adjustment)
- A decrease in the value of the property
- And a variety of other factors
Lenders will consider many of these types of issues a “hardship”, and are generally open to altering the repayment terms of the mortgage loan (and on certain loans the principal balance), due to the borrower’s hardship.