A Simple Explanation of Loan Modification
by Ginger Taylor
The crash of the housing
market has sent shock waves
throughout the economy,
encouraging the spread of
loan modification. Modified
terms can help prevent
foreclosures and bankruptcy,
while also proving to the
advantage of lenders. It is a
win-win situation for all
parties involved and can
greatly benefit the economy.
Loans are offered by banks
and other financial
institutions. It is when money
is given upfront in exchange
for a contract promising
repayment with interest. Over
the course of many monthly
payments, this advance is paid off. Until then, the lending
institution holds a lien over the property. Any proceeds from sales
must first be given to the lender until the remaining value of the
loan is repaid.
Industry standards, government mandates, and loan defaults are
the most common causes for the modification of loan terms and
conditions. This is usually in response to a crisis or to address
widespread consumer concerns. Sometimes, it occurs because of
other economic and business factors.
There are numerous advantages for the borrower with loan
modification. Better rates of interest are common. Lower cost
fees and/or more favorable conditions allowing a borrower to
avoid additional fees are also common. The loan can also be
effectively refinanced, resetting the loan term in order to lower
the individual payments by extending the time limit for paying off
the loan.
The state of a loan does not impede the ability to apply for
mortgage modification. Even if you have faulted on your loan or
face foreclosure proceedings, you can still file an application for
modification. However, even if you are up to date or ahead on
your loan, you can still seek modification.
Banks and finance companies are not obligated to offer modified
terms, but it is often in their favor to do so. Borrowers with a
good payment history are likely to refinance and pay off their
original loan, depriving the bank of the loan profit. For poor
payment histories, altered terms and lowered expenses make it
more likely to be profitable than a costly and inconvenient
foreclosing process.
There are numerous government incentives, and even some
limited mandatory programs, to push lenders to engage in more
loan renegotiation. These rules and laws are intended to soften
the blow of the housing market crash.
For help with loan modification services contact a qualified loan
modification attorney that will look out for you and your family's
best interest such as Janian and Associates.