I've been on a credit kick lately and I think its time I start looking at a loan modification. I've been thinking about it for a while since all of this hoopla about homeowners losing their homes and others saving their homes.
My home is worth less than what I currently owe and the minimum payments on my credit cards are going up due to the CARD ACT, so if the bank is willing to work with me it's worth a shot. I did some research and you don't have to be behind in payments or in financial trouble at the moment.
Let's start with a definition of what a loan mod is then we'll get into the details.
Simply put a Loan Modification or Loan Mod is a change to the mortgage terms which are agreed to by the lender and the homeowner. The lender modifies the existing loans in order to work with the homeowner because of hardship. The changes are usually in the form of a rate reduction, where the interest rate is fixed for a certain duration of time or a term extension, where the length of the loan is increased by several years.
When the bank makes these changes it makes the loan more affordable for the homeowner, it keeps a foreclosure off of the banks books, it allows the homeowner to keep the house and it keeps the property values from plummeting.