The definition of a loan modification is as follows;
A loan modification is defined as “the modification of an existing loan agreement between a borrower and a lender, whereby the lender agrees to either; lower the payment amounts by spreading the loan over a longer term, lowering the APR (annual percentage rate – interest), combining the loan with other loans in a debt consolidation loan. Sometimes all three of these modification scenarios are made on the note(s).
Loan modifications are generally carried out with borrowers who have mortgages that they are defaulting on, or will soon be defaulting on. However, mortgages is not the only loan product that can be modified. Many borrowers do not understand that loan modifications can be applied to any type of loan
When Are Loan Modifications Carried Out?
Loan modifications are carried out when a borrower is defaulting, or in danger of defaulting on an existing loan, OR when the borrower needs to “free up” cash (or capital).
Loan modifications are used when business investors need to free up capital for other investments, and loan mods are used when consumer borrowers need relief on their existing loans, and/or mortgage terms.
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August 29th, 2009 at 5:27 am
This post is great. I believe it is better to ask for help when it comes to modifying your loan. An attorney or consultant can renegotiate your terms with a higher success rate. They are experts at lowering your monthly payments.
August 29th, 2009 at 9:22 am
Good point about using a professional attorney or third party help when modifying a loan.
There is a fee involved of course, but you are still WAY ahead of the game if the attorney’s office negotiates a lower APR over the full term of the mortgage.