subject: Loan Modification Definition- What it Really Means for You [print this page] For countless families across the country loan modifications is becoming a popular alternative to losing their houses due to foreclosure from the bank. Even still, many people may ask what is the loan modification definition? It is a good idea to fully understand what the definition is before considering applying for a loan modification.
Let's take it straight from Investopedia:
"A loan modification agreement is different from a forbearance agreement. A forbearance agreement provides short-term relief for borrowers who have temporary financial problems, while a loan modification agreement is a long-term solution for borrowers who will never be able to repay an existing loan."
So in short, loan modifications are changes to your loan agreement. Your monthly payments get more affordable, and you don't have to default on your loan, thus making you able to keep your house instead of foreclosure. Banks offer these types of programs because often times it's easier to work with you than to go after you. Also it is far less costly for them in the long run. Remember, foreclosures really hurt the banks as well, not just your credit.
When a borrower comes to the conclusion they would like to make a loan modification their status in terms of the loan can be late, in default, in bankruptcy, or in foreclosure at the time the application is made. Because of this factor the loan modifications for each person will vary accordingly. There are many types of loan modifications available as well that you should be aware of.
Some common types are as follows:
Interest rate reduction, or a change from a floating to a fixed rate, or in how the floating rate is decided
Principal reduction
Late Fees and other penalties accrued can be waived
Extending the loan term
Capping the monthly payment to a percentage of household income
Mortgage forbearance program
Since the passing of the Financial Stability Act of 2009 and with it the program called the Home Affordable Modification Program, also known as HAMP, many major lenders are now joining to effort to make loan modification more attainable for the average homeowner struggling with their monthly payments. The HAMP Program is quickly becoming the industry standard for lenders to determine potential modification applicants. There is certain guidelines and eligibility criteria that have been set forth in the HAMP program which help speed thing up for both parties involved.
Still, even with the help of such programs one can still choose to take on the task of getting their loans modified themselves. If they decide to get help then there are services available for that as well. If you're looking for a reputable company to assist you with loan modification please visit Fast Loan Modification Help, enter your contact information and you will be put in touch with a Loan Modification Specialist that can address any concerns you may have.
Loan Modification Definition- What it Really Means for You
By: John Hughes
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