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The Mortgage Loan Modification process provides for either a permanent change in one or more of the terms of a mortgagor’s loan, which allows a loan to be reinstated if the loan is behind or past due and results in a payment the mortgagor can afford. This site will give you some helpful tips and hopefully answer your questions regarding mortgage loan modification.
In the normal progression of a mortgage, payments of interest and principal are made until the mortgage is paid in full (or paid-off). Typically, until the mortgage is paid, the lender holds a lien on the property and if the borrower sells the property before the mortgage is paid-off, the unpaid balance of the mortgage is remitted to the lender to release the lien. Generally speaking, any change to the mortgage terms is a "modification", but as the term is used it refers to a change in terms based upon either the specific inability of the borrower to remain current on payments as state in the mortgage.
Mortgages are modified to the benefit of the borrower in one or more of the following ways:
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Reduction in interest rate, or a change from a floating to a fixed rate, or in how the floating rate is computed
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Reduction in principal
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Reduction in late fees or other penalties
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Lengthening of the loan term
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Capping the monthly payment to a percentage of household income
The borrower can be current, late, in default, in bankruptcy, or in foreclosure at the time the application for modification is made. The programs available will vary accordingly.
There may be modifications made at the discretion of the lender. The lender is motivated to offer better terms to the borrower because of the expectation that the borrower might be able to afford a lower payment, and that a performing loan (i.e. one in which payments are current) will be more valuable ultimately than the proceeds obtained from a foreclosure sale.
The state and federal government may structure a mortgage modification program as voluntary on the part of the lender, but may provide incentives for the lender to participate. A mandatory mortgage modification program requires the lender to modify mortgages meeting the criteria with respect to the borrower, the property, and the loan payment history.
