What is Loan Modification?


September 23, 2014

Loan Modification

Whenever a loan becomes unmanageable, the parties can agree to change (or modify) the terms of the loan. Any type of loan can be modified, including car loans, home loans, and unsecured loans.

In order for a loan to be modified, all parties to the loan have to agree to the changes. Generally, the parties include the lender (usually a bank) and a borrower (often a consumer).

What Loan Terms Can Be Modified?

There are several different loan terms that could potentially be modified. These include:

  • Altering the interest rate (this might be a lower amount or a switch from an adjustable to a fixed percentage);
  • Decreasing the principal amount;
  • Canceling or reducing late fees; or
  • Extending the life of the loan.

How Will I Know Whether I Qualify For A Loan Modification?

There are many different factors that influence the outcome of a modification request. Some of the factors include who the loan servicer is, who the loan investor is, if there is insurance on the loan (this is different from homeowner’s insurance), the financial situation of the borrower, the loan-to-value ratio, and other factors.

Most lenders process modification requests through different programs. Many people have heard of the HAMP loan modification program (often called “the Obama program”). This is one example of a loan modification program which some lenders subscribe to.

Mortgage Modifications

Perhaps the most common type of loan modification is a change to a mortgage (or home loan). When a homeowner fall behind on the mortgage, they can’t just re-start make their installment payments again unless they catch up the entire amount they have missed. For many homeowners who have fallen 3 or more payments behind, this can be really tough. So the homeowners have to request a modification to get back on track.

Loan modifications are not a simple process. It is highly recommended that individuals facing debt management issues consult a professional.

At Ziegler Law Office, we help consumers with debt problems. Our loan modification lawyer will help you navigate this foreclosure alternative. In addition to loan modification and foreclosure, we can also help you with creditor harassment and other debt management essentials.

Don’t try to tackle these stressful, emotional, challenging issues on your own. Fill out the form to the right to schedule a free consultation. Let us help make your debt more manageable.

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