What is a Loan Modification?

A Loan Modification is a permanent change in one or more of the terms of a loan allowing the loan to be reinstated which typically results in a payment the borrower can afford. It is interesting to note that in most cases a homeowner in need for mortgage help will indeed qualify for a loan modification. To ensure that you understand what a loan modification will actually do for you, consider the following facts:

A loan modification is indicated when the original loan that is secured by a residence has terms that make it impossible for the homeowner to continue making the payments, thus risking the loss of the residence.
Loan modifications are not the same as debt consolidations, refinancing loans, or even forbearances. Instead, they are long term solutions for rising interest rates or other hardships that are threatening to overwhelm the budget of a homeowner.
Loan modifications stop foreclosure proceedings and instead reinstate the loans as they are being modified.

Today, many homeowners are implementing a Loan Modification Plan to stop foreclosure. If you can currently make your regular payment, but you can't catch up with the past-due amount, CARPENTER MORTGAGE SERVICES will negotiate with your lender to fold any past-due amounts, including interest and escrow, into the unpaid principal balance. This new amount will be re-amortized over a new period of time. Or, if you are unable to make payments at this rate, we will negotiate with your lender to extend your loan for a longer period of time, modifying the loan amount to a more affordable level. A Loan Modification will change your existing mortgage note and give you a fresh start in managing your home. Your account will be brought up to date immediately. Our purpose is to help you "keep" the "loan" you have now - after we are successful modifying the terms.

There are some other facts that explain why lenders are actually in favor of working with borrowers and their legal specialists in order to negotiate equitable loan modifications.

All or portion of the outstanding principal and interest, past due escrow, late fees, and even costs may be rolled into the loan modification and thus will not be lost revenue to the lender. Since they are spread over a long period of time, they do not pose a problem to the borrower.
Modified mortgages may use a step rate approach or an extended term methodology to provide for the repayment of the due and past due funds. The lower payments ensure the repayment by the borrower while to the lender the added time is actually money in the bank in terms of yet to be earned interest due.
Foreclosure is avoided and even though banks routinely foreclose on properties and sell the homes to other buyers for a fraction of a price, the slowing housing market has made it difficult for banks to unload such properties and then recover any additional funds from the previous homeowners. Loan modification is a fiscally much more attractive solution for any lender.
A modified loan protects the credit rating of a borrower and it also helps lenders in showing less defaulting loans in their portfolio. This of course makes a good impression when the financial institution is wooing potential investors.

Here are the requirements you must meet in order to be considered a good candidate for a loan modification process to be started on your behalf:

Your monthly mortgage must be affected by a verifiable reduction in income.
It is required that you are currently employed or have another source of a stable and predictable monthly income that is provable.

The home for which you are seeking to obtain a loan modification must be your primary residence.

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