What You Should Know About Mortgage Modification

Simply put, mortgage modification is the process by which the terms and conditions of a loan are altered or modified outside the original conditions laid down and agreed to by both the borrower and the lender. Mortgage modification is not a rare or an impossible task; in fact, almost all loans can be modified should the conditions arise.

To understand how mortgage modification works, we first need to know a little about how the mortgage works in the first place. In the normal course of events, a mortgage payment means that the loan amount as well as the payment of interest is paid off at regular intervals until the entire loan itself is paid off. Usually, the lender has rights over a part of the property until the loan is paid off. If the property is sold off before the entire loan amount is paid, the unpaid amount of the loan has to be paid to the lender to release the lien or the part of the property that the lender holds.

Mortgage modification can occur in any circumstance, but it usually happens when the borrower is unable to pay the loan according to the terms and conditions originally worked upon. It can also occur if there is a government mandate or ruling to the lenders to alter the terms and conditions of all loans. Mostly, a mortgage modification means that there will be a change in the amount of money that will be paid on a monthly basis because there is some modification in the interest rate, the term of payment or even the outstanding principal amount.

There are several types of mortgage modification. The most common of all is the reduction in interest rate or the shift from a fixed to a floating rate of interest. Other conditions in which the monthly payments are altered are the reduction in the principal amount, the reduction of late fees or other penalties and a lengthening of the loan term.

In many cases, borrowers may be in default, in bankruptcy, or even in foreclosure when the mortgage modification happens. In these cases, mortgage modification aims to offer better terms to the borrower to encourage him or her to make the payments under the eased conditions.

With the inset of the financial crisis in the United States of America, the federal government initiated the Federal Home Affordable Modification Program in 2009 to assist the 7-8 million struggling homeowners by getting the lenders to offer them better lending rates. The program worked with organizations such as banks, credit unions, the VA, the FDA, the USDA and the Federal Housing Finance Agency to formulate standard mortgage modification terms that lenders could use when borrowers applied for a loan modification. These mortgage modifications are generally applied to loans that originated before 2009.

Making use of mortgage modification terms can be extremely useful for those borrowers who are in genuine need of Loan Modification assistance Maryland and who can pay their loans when presented with better loan terms.

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This article has been taken from http://www.ideamarketers.com/?articleid=3442129&CFID=213509399&CFTOKEN=22247775

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