If you’ve defaulted on your loan payments, you must be thinking of applying for a loan modification to save the property. We, the borrowers, think that it would be beneficial for the lenders and mortgage servicers to modify the loan rather than foreclose. But in reality, things are different.

As per a new report of the consumer advocacy group, mortgage servicers make more money if they foreclose the property. So, who are the mortgage servicers? They are the companies who collect the monthly dues from the borrowers and distribute it amongst the investors. It has been noted that the homeowners, lenders and investors generally lose money on a foreclosure whereas mortgage servicers do not.

What do homeowners think of foreclosure?
As homeowners, we think that a foreclosure would not be a good option for the lenders and investors. Both of them would lose money if they foreclose the property. It is believed that if a lender forecloses the property, he will have to settle for 20-30 cents on a dollar.

What do mortgage servicers think of forceclosure?
The loan servicers have different priorities and thus, do not think of foreclosures in the same way as the borrowers. Servicers do make profit when a property is foreclosed unlike loan modification wherein the servicers may face a loss. Also, the incentives offered to servicers in order to help avoid foreclosure are much less compared to the profits they make by foreclosing a property. This is one of the reasons which resulted in the $75 billion program to limit foreclosures by the Obama Government. The money would be given to servicers who would modify home loans.

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Loan modifications may or may not affect your credit score. Generally it is believed that a loan modification will have a positive impact on a borrower’s credit score. In case, if the lender has reduced the principle amount of your loan, it will also help you in reducing your debts. Also, if you pay off your debts on time after the loan modification for the next 6 to 12 months, your credit rating will start improving.

However, after the loan modification, if you’re late on your payments or start making partial payments, your credit score will get negatively affected. In addition, the lender would report the principle reduction as “debt satisfied for less than the full amount”. This will also have a negative impact on your credit score.

In certain cases, the lenders would not accept your loan modification request if you’re not delinquent on your mortgage payments. You may have to show that you are 30 days late on your payments. If the lender reports this 30 day late payment to the credit bureaus, your credit score can go down by few points.

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Hello everyone,

It’s a pleasure for me to announce that nearly 70,000 discussions have taken place in MortgageFit Forums till date. Moreover, the community has also crossed 32,500 members!!! Though there are various categories in our forums, yet discussions on loan modification, bankruptcy, refinance and first time home buyer’s tax credit are gaining importance in recent times.

With the low interest rates prevailing in the market, the borrowers want to take advantage of it by refinancing their existing loans. The low rates and first time homebuyer’s tax credit have also encouraged people to buy a home of their own. Perhaps this is why discussions on such issues are getting quite common these days.

With new plans announced by President Obama, lenders are offering loan modification as a solution to borrowers who have defaulted on their loans. I guess, loan modification has become popular because people have realized that it would help them in saving their property when they are in mortgage problems. That’s the reason why discussions on loan modification have increased in number recently.

Experts participating in this community are doing their best to guide the common people so that they can take the right step in solving mortgage and related issues. So, if you’re in mortgage problem or you need to discuss a financial issue, feel free to speak about it in our forums.  Our members and experts will come forward to help you with their real life experiences on such issues.

So, let’s hope… our forum discussions will help resolve your mortgage/financial problems. Here’s wishing that you get over your problems asap and lead a tension-free life.

Mortgage Modification, also known as loan modification, has become quite popular in the recent times. Borrowers who are unable to refinance or go for any alternative repayment plan in order to avoid foreclosure may choose loan modification.

In a mortgage modification, the lender may extend the loan period or reduce the interest rate with the aim to minimize your monthly payments. However, he will add any mortgage dues to the outstanding loan balance. Thus, at times a loan modification can raise your payments as well.

There are certain criteria which should be kept in mind while applying for a mortgage modification. Borrowers can apply for a loan modification if the lender hasn’t declared a foreclosure. Borrowers should be delinquent on their loan payments for at least a month. The property should be in good physical condition when the borrower applies for a loan modification. Moreover the loan should have been originated for more than a year.

The borrower should write a hardship letter to the lender in order to apply for a mortgage modification. In this hardship letter, the borrower should inform the lender about his hardship which resulted in the non-payment of the mortgage dues. If the lender is convinced, he will accept the borrower’s request. The borrower can also take the help of a loss mitigation expert who will negotiate with the lender regarding the loan modification.

With the recent downfall in the real estate market, lots of people are facing issues regarding their mortgage payments. Loan modification offered by the lenders is a sort of bailout program for these people. This helps them in saving their credit and their home.