Mortgage Modification Results
If a financial hardship has left you short on money to pay your monthly mortgage bills, you might be thinking about applying for mortgage modification through the federal government's Home Affordable Modification Program. Under this program, the government provides financial incentives to encourage lenders to modify the loans of struggling homeowners. The goal is a simple one: Reduce the payments that homeowners in financial crisis have to make each month. Applying for a mortgage modification, though, doesn't guarantee a lower payment.
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Principal Reduction
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If you prove that your financial hardship is significant enough to make your current mortgage payments unaffordable, your mortgage lender can provide you with relief in several ways. The lender might decide to forgive a portion of your outstanding principal balance. This would reduce the size of your mortgage loan and, as a result, require you to make smaller payments each month. You won't have to repay the portion of the balance that your lender has forgiven.
Interest Rate Drop
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Your lender might also choose to reduce your monthly payment by slashing the interest rate attached to your loan. Depending on the size of your loan, and the drop in your interest rate, such a move could save you hundreds of dollars a month in mortgage payments. A lender could make your interest-rate drop permanent or temporary, depending upon the severity of your financial setback.
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Reworking Loan Terms
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After reviewing your financial information, your lender might decide to lower your monthly payment by changing the terms of your loan. If you have a 15-year loan, your lender might change it to a 30-year version. Because your loan payments would be spread out over a larger number of years, your monthly payments would be smaller. This, too, can reduce your mortgage payments enough to allow you to keep your house out of foreclosure.
Refusal
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Your lender does not have to accept your request for a loan modification. It might rule that you didn't provide enough evidence to prove that you can't afford your monthly mortgage payments. If your lender does refuse your request for a loan modification, you'll have to either find some other way to pay your bill each month or resign yourself to eventually falling into foreclosure. You might also be able to put your house on the market and sell it before you start missing payments and the foreclosure process starts.
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