Loan modification is currently being utilized by borrowers to avoid foreclosure and to retain their home.
Home ownership is a part of everyone's dream.
For some people it is a source of emotional and monetary stability.
Nevertheless, when changes occur such as difficult economic situation the borrower is inhibited to make the monthly home loan payments.
In this case the borrower can apply for loan modification.
Loan modification is a modification to the conditions of mortgage loan by the loan provider.
The adjustments can be the rate of interest, amount borrowed, or the type of loan like amending the variable rate mortgage loan to a fixed-rate mortgage loan.
There are a lot of good reasons to get a loan modification.
One of the reasons of loan modification is the impact of the foreclosure on the credit profile.
This will affect in their future plans to purchase a home even with a considerable down payments.
Another reason for having loan modification is to be able to keep their home by paying in the amount that they can afford.
Since adjustments will be made according to their capacity in paying off the loan.
The reason that the payments have increased may be related to the change of rate led by adjusting the rate mortgage which may be brought about by the change in employment status.
There are also advantages of loan modification to the loan providers.
The lender can save the cost of filing for foreclosure.
Filing for foreclosure and going through the process of foreclosure is time-consuming and will entail a big amount for lenders.
It will be more cost-effective for loan modification instead.
When the borrower goes into foreclosure they normally stop making the mortgage payments.
This will add a burden on the lenders because they have to take the costs of paying for the taxes.
When the debtor ultimately decides to abandon the house and re-locate, the lending company will likely need to take care of the residence which implies added costs.
They have to upkeep the property, settle the association fees if there is any, cover for the utilities particularly if the homes are in more less than ideal areas.
The lender is also up against the decrease in the property's value particularly if it isn't maintained and may also be vandalized.
Some homeowners may intentionally abuse the house before they ultimately leave.
They might obtain those items with value such as the major appliances which were already there when they purchase the property.
Furthermore, selling the property may have less value than what the debtor owes on it, particularly that the market has declining value on properties.
The more time it will take to sell will entail huge losses for the loan provider.
Loan modification is a lot more advantageous because they make changes of the terms of the borrower's existing loan.
This is often done for a short period of time to aid the borrower to get back to their economic track, though the original loan is still there.
This is an alternative for the borrowers to cling on if they are not capable of refinancing their present mortgage.