Loan modification pros and cons

A loan modification is the most popular solution for helping a homeowner avoid foreclosure. It can also help a homeowner achieve a lower monthly mortgage payment that is more affordable for their financial needs. But you must fit all the qualifications set by your lender, in order to be approved for this type of assistance.

Homeowners who are not familiar with this process may wonder "What are the advantages and disadvantages of a loan modification?" One thing for sure is that there are many benefits that come along with this type of assistance.

Below you will find common advantages and disadvantages that come along with a loan modification:


  1. Lower interest rate on your mortgage. If you qualify, you may be able to lower your current monthly interest rate on your mortgage. With a low interest rate your monthly payment will decrease dramatically.
  2. If you are one of many homeowners that purchased an adjustable rate mortgage (ARM). Most of these borrowers are now realizing that once the interest increase rate adjusts, they will no longer be able to afford the payment. With a loan mod you may be able to get out of the ARM and into a fixed rate.
  3. Stop foreclosure proceedings from taking place and remain in your home. Over the past two years foreclosure rates have skyrocketed across America. By doing this your lender will apply the late charges to the back of the loan, stop foreclosure, and give the borrower a fresh start.


  1. You accept a modification that your truly cannot afford and later are foreclosed on anyway.
  2. You continue paying on an underwater asset that may take years to come up in value.
  3. Some lender may make you sign away your legal rights on the original mortgage

I have to say here are not too many disadvantages that come along with it. What do you have to lose? The only thing I have to say is that the process is very time consuming and you must have patience. Personally I have seen it take anywhere from 45 days to a whole year to complete.

If you are having difficulties paying your monthly mortgage payments and are in need of assistance, a loan modification may do the job!

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Moe Bedard
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My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications. I currently live in Carlsbad, California with my beautiful wife and children.
  • LP

    I was just turned down by Chase today. I had been working with the Exec department and they told me they would call me back in a few days. Well I decided to call today and they said my income was too high, but the thing is my mortgage is over half of my net income. They couldn’t give me a straight answer and told me to wait for the letter which I found out by the exec department takes up to 30 days to receive a denial letter.

    I really don’t like Chase Mortgage. I haven’t since I got my loan with them. I feel so helpless. I can hardly make my payments and it doesn’t seem there is much I can do.

    I had been waiting since April 2009 when they gave me an answer because of the exec department. But I don’t think that was the best way to go.

    Thank you.

  • Billie Mitchell

    Hi, I did a loan mod with Fransen and Molinaro. I did the 3 month “Trial Period” and sent all my payments on time. Now that the 3 months are up, I called for my contract package and they told me that they are denying my modification now. Can they do this?

  • Billie Mitchell

    I have Litton Loan Servicing…is this common with them? They have scheduled my home for auction.

  • Vina Crawford

    My husband’s job move to Canada in July 2009. Income now in half. Do we have a possibility of having our mortgage modified with just one income?

  • myhome

    Living the WELLS FARGO nightmare. Multiple times I was asked to resend the documentation. Then their agents will give different story many times and disown the information provided by other agents.
    Worked for more than a year and now I have given up.

    This is ridculous. These banks are real parasites and I am never ever going to do any business with this wretched Wells Fargo bank. Blood sucking parasites creating economic slavery. They would have been looking for jobs had it not been for trillion dollar bailouts.

  • Lillian

    For help with mortgage restructuring, refinancing and modification, the Neighborhood Assistance Corporation of America (NACA) has a program called “Save the Dream” which offers those who qualify, same day solutions. Go to to find a list of cities that sponsor these events and what documents you’ll need to bring. According to NACA, 87% of those who attend, receive positive same day results. I went on 06/15 in Houston and I must say they cut through Bank Bull Crap with a Ginsu knife and I, along with many many others left there satisfied. I received a trial modification and reduced interest rate in one day, while I was still waiting on a decision from my bank. People were at the event from all over because the event did not go to their city. Credit scores do not play a part in the decision and you deal directly with your lender who is on site at these events. If you want positive results go to the nearest city and get it done!!!! I’m living proof!!!!