Authored by Jayant Row in Loans 
Published on 04-27-2009

If you have a mortgage and are constantly concerned with your ability to meet payments, you can seek a loan modification that will ease your payments and forestall any foreclosure process.

When a borrower misses the payment by a day, no penalties are assessed. From day 16 to 30 a late charge is assessed and it is likely that the lender will make an attempt to contact you. If your payment is delayed for between 45 and 60 days it is likely that you will get a letter pointing to the breach of contract and giving you 30 days to square up the accounts and make a payment, including the late fees if so assessed. They may also at this stage offer you a repayment plan or loan modification scheme. In a repayment plan the lender may offer to reschedule your missed payments so that your subsequent two or three payments make up this deficiency.

Loan modification goes a step further. It takes into account that you as a borrower may not even be able to honor any repayment plans. This loan modification halts any foreclosure process and readjusts all the terms of the loan so that it becomes more affordable. It can do this by lengthening the period of the mortgage, thus reducing monthly payments. This can also be achieved by reducing the interest rates and hence the payments due every month. A loan modification can also opt to include the unpaid amounts into the loan amount, and thus allow you to pay back the overdue amounts over a longer period of time.

If you skip this loan modification process it is almost certain that the lender will opt for foreclosure and you stand to lose your property. So first obtain guidance on whether you qualify for the lender’s loan modification program. Then see that you submit all the paperwork required for this loan modification, along with all necessary documentation. Before you make this application assess your own finances and determine the monthly payment that you can easily make and sustain, and the reasons why you have arrived at this figure. This will help you in your negotiations with your lender or bank and convince them of your sincerity.

You may find that the current market value of your home is less than the amount you still owe to the lender and this can make your negotiations for the loan modification a little tougher. You would have to convince them of your ability to raise other resources to pay back the amounts due to them.

Before you go for a loan modification scheme, ensure that your credit rating is good and over the minimum standards that lenders would be comfortable with. A high credit rating score could enable you to negotiate for lower interest rates, or an increase in the term of the loan if you can provide the lender with proof that your credit rating is sustainable over time.

A low credit rating is not the end of the world. Due to the present situation where companies are fighting for business, there is every chance that you will find a lender to give you that loan modification that you want. You just might have to look around. But improving your credit rating and then looking for that loan modification is the better way to go.