If you have fallen behind on your mortgage payments and are facing possible foreclosure, a loan modification is one possible option to resolve the matter. However, depending on your situation, it may not necessarily be the best option.
There are several different ways that your mortgage lender could potentially modify your loan, such as decreasing your balance, reducing your interest rate or extending the term of repayment. However, although a loan modification may sound good in theory, we believe that they are rarely the best option. Before you agree to a loan modification, carefully consider the following information.
Availability
You can request a loan modification from your lender, but that does not mean your lender has to give you one. Indeed, mortgage lenders have little to gain from it, so there is not much incentive to do so. There is also no contractual obligation in your loan documents requiring your lender to give consideration to a modification.
Terms
According to the Consumer Financial Protection Bureau, a modification will change the terms of your mortgage, both the amount you will have to pay per month and the time frame you have to pay back the loan. If you cannot abide by the new terms when making payments, you could again find yourself in danger of losing your home.
Time
Even if your lender is willing to modify your loan and you are able to come to acceptable terms, the process of gathering the necessary documents, sending them in and waiting for a response can still be stressful and time-consuming. There are other options for avoiding foreclosure that may be easier and faster.