Loan Modification

• Modifying a home loan is essentially changing one or more terms of the original home loan. When signing mortgage papers, borrowers agree to a specific mortgage rate, monthly payment and loan term, or length of financing. The interest rate on a home loan greatly impacts the mortgage payment, and lowering the payment on a home loan often calls for lowering the interest rate. To help a borrower who has fallen behind on his mortgage, some lenders consider altering the mortgage rate with the intent of creating a more affordable home loan payment. This helps borrowers catch up and avoid foreclosure.
  
  

When to Contact the Lender

• Mortgage lenders differ in their requirements for a modification. Some only work with borrowers who've already missed a payment. In this case, it helps to contact lenders as soon as possible to begin the modification process. Lenders ask for extensive documentation when reviewing a request, and supplying this information in a timely manner can expedite request for help. Information used to determine modification eligibility includes most recent paycheck stubs, a list of household bills, mortgage statement and a hardship letter that explains the cause of the payment problems.
  
  

Managing the Past Due Amount

• When lenders reduce monthly payments with a modification, they factor in the total amount due from skipped payments. To bring the account current, lenders may spread out past due payments over a few months, or they may decide to extend the mortgage term to compensate for missed payments.
  
  

Other Available Help

• Mortgage modifications are common when borrowers get behind on payments, but lowering the mortgage payment on a home loan does not always solve payment problems. Modifications help when borrowers deal with a decrease in income. However, losing income completely due to job loss or the inability to work calls for a different type of help. Some mortgage lenders are open to a forbearance agreement, which can also result in a reduced payment. Lenders sometimes allow borrowers to miss payments for one or several months without foreclosure. Like modifications, lenders typically reserve this help for a borrower who's behind on his home loan and can document financial hardship with a hardship letter, list of debts and proof of unemployment.