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Modification is where the lender changes your loan to something that is affordable. Most of the time it changes the rate, term and etc. If it is not affordable to the borrower it is considered predatory modification. So it should include permanent reduction in interest rate, extend terms of loan, reduce payment, deferring prior missed payments can be added to principal, and must do away with the ARM in your original loan. You should come out with a lower montly payment but my owe more if money added to principal to make up back payments.

No one knows what the effects of a Loan Modificaiton will have for all involved as this is a new idea and very few have been done. There will probably be a lot dowe in the future because demand is great brought on by these adjustable rate mortgages.

Not everyone will qualify and not all loans can be modified. You must be able to afford the new payment by showing proof of income, expenses, You must be able to show proof of income by W2 and etc. They require a hardship letter and a financial statement (income and expenses that show a positive cash flow of around $150 a month left over).

Option or pick a pay loans will be hard to get modification on.

They will require a down payment on the Loan Modification. So save all the money you can. The Loss Mitigation Dept will take your income, expenses, hardship letter, and pay vouchers and decide if you can pre-qualify for a modification. If you meet the requirements, they will talk to you about a modification and make an offer and ask for money down. Before you agree to it, make sure it is something that meets your needs. If not, you can make a counter offer. Sometimes they have to present it to the investor for his ok.

Most who get a loan modification find themselves back in forclosure within 24 months so make sure it is something you can pay.

Modification is like a refinance. Mortgage co makes an offer and borrower accepts. So it should read like a new loan and meet all requirements and be reported like a new loan. They send out the Loan Modification for your signature. Read it carefully and sign and send back.

Principal Reduction should be main goal of loan modification.

The success rate of Loan Modificaitons is only 65% Redefault in 24 months is common. Most cannot afford the payment they are in already and unless they modify the loan to give you an affordable payment it may not help in the long run. Important to work out payment you can afford.

Loan Modifications are not being monitored or enforced to guard against adverse problems for the borrower and this will create a big problem for the borrower because no telling what kind of modification they will wind up with and they will have no legal recourse.

The Mortgage Co is not concerned in really helping you their goal is to make your loan current on the books so they can report back to the investors that your loan is current. This makes them look good. It is very dangerous to seek modification without proper help or to protect yourself.

They are creating their own Loss Mitigation Dept to save money but if not careful defaults can cause cash flow problems and lead them to bankruptcy. This happened in the 90's.

If you need a Loan Modification contact the Loss Mitigation Dept of your mortgage co and request your loan be modificed. Submit hardship letter, proof of income, and income and expense statement. Get pre-qualified.
Examine the offer and see if it meets your needs. If it does, accept it. If it does not, make an offer. Ask them to present it to the investor if they say they cannot do that. Sometimes the investor will agree to your terms.

The only problem collections on your loan will continue all thru the Loan Modificaiton. They will continue to call you for payment, report you late to the credit bureau until all is settled and you are under the loan modification.

Be sure and keep good records and a copy of the Loan Modificaiton as it is not recorded and your copy is the only proof that your loan has been modified.