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Loan Modification
[March 8, 2008] by Foreclosure Help
Filed under: Foreclosure Options

Loan Modification
A loan modification is a permanent change in one or more of the original loan terms on a homeowners original loan, which allows reinstatement of the loan and prevents foreclosure. As a foreclosure prevention alternative, a lender may consider modifications which:

Capitalize delinquent interest, escrow, fees, and costs (based on permission on P&S Agreement)
Implement a step rate mortgage
Extend the term of a mortgage
Reduce and modify the interest rate
Or any combination of the above considerations.

What a loan modification does:

Instantly removes a loan from foreclosure
brings a loan current (we are able to negotiate in some instances with $0.00 out of pocket)
Adjusts the term and rate of the mortgage

Different Types of Loan Modifications:

Straight Capitalization Modification - This modification adds delinquent interest to the principal balance and the loan is re-amortized over the existing interest rate and term
Term Extension - This modification extends the term (number of months). The rate stays the same and the re-amortization is done same as straight cap listed above. The term can not exceed your original mortgage term (if you started with a 30 year mortgage the term can not extend past the 30 years from modified date)
Step Rate Modification - This modification also adds the delinquent interest to the principal balance but the interest rate is temporarily reduced to allow a homeowner the opportunity to afford the payment. The typical step rate modification would drop 1% for every year and they typically do not last longer than 3 years.
Interest Rate Modification - This modification adds delinquent interest to the principal balance and the loan and the loan is re-amortized at a reduced interest rate.
A combination of any of the above

Want to learn more Loss Mitigation Training

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2 Responses to “Loan Modification”

Ocwen Loan Modification Says:
August 22nd, 2008 at 8:29 am
My father is a few months behind on the mortgage and is planning on paying this month. He would like to keep the home and possibly sell the home to me and my husband to save it. I need loan modification help with Ocwen
GMAC Loan Modification Says:
August 22nd, 2008 at 8:35 am
I am on a lifetime disability. I make 1145.00 a month on DSS and 400 a month for a room i rent. Before my payment went up 1500.00 was enough with the little odd job i could do.But the higher my payment got the more i had to try and do and it almost put me back in the hospital. If i could get my payment back down to 7or8 hundred with interest principal and escrow i could make it.

2 Responses to “Loan Modification”

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