Top Advantages Of Loan Modification

When homeowners find themselves unable or aware that they will soon be unable to make their mortgage payments, many find themselves considering a loan modification as a solution to their struggle. The objective of a loan modification is to keep the homeowner in their home by modifying the original mortgage terms and/or payment amount so that they are more in line with what the borrower is capable of paying.

But it’s not all about the borrower. The student loan settlement attorney also benefits the lender. In many cases, it is in the best interest of the lender to avoid the foreclosure process; particularly if the borrower is actually experiencing short-term hardship and will likely be able to resume making timely payments shortly.

Extended mortgage terms

Many loan modifications will include an altered term of repayment. The extension of the term of the loan from 30 years to 40 years will often reduce the monthly payment on the mortgage.

Decreased interest rate

Sometimes lenders will agree to decrease the interest rate on a mortgage as part of a loan modification. This can be a permanently fixed interest rate reduction, or a waterfall, which is a rate reduction for a few years, then a rate increase for the balance of the term.

Principal Reduction:

A principal reduction is when the lender reduces the amount of principal that is owed. They no longer expect payment for the amount of the reduction – it is essentially partial debt forgiveness. This is the most effective way to reduce payments and is the most beneficial to the borrower.

Principal Forbearance:

A principal forbearance means the lender forgives the interest on a portion of the principal; they designate a portion of the principal and collect zero interest on that part of the loan. The borrower still owes the full principal amount but will pay it when the property is sold, the property is refinanced, or when the loan matures. It is essentially a balloon payment added to the end of the loan term.

Lastly, loan modification lawyers offer lenders incentives when they help struggling homeowners who are seeking to resolve their financial difficulties through the modification of their loan. Many lenders working with homeowners are extending temporary loan modification terms to their borrowers. When the borrower/homeowner can provide proof that they will be able to make their payments by successfully doing so during a trial loan modification period, the lender may then consider agreeing to a permanent loan modification for the homeowner. Lenders participating in the Hamp initiative receive $1,000 from the government for each home modification. The federal government also awards lenders when their borrowers make consistent, regular mortgage payments.

If you would like to discuss the benefits of a loan modification in more detail or if you have questions about the likelihood that your loan modification application will be approved, please get in touch with one of the experienced loan modification attorneys.

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Debt Rescue Law has been found by Sandy Van, an Attorney and Realtor, licensed to practice law in the area of debt settlement throughout Nevada and Washington.