What is a Loan Modification?

Written by: Nicole M. Garcia, Esq.

At some point or another in our lives we are faced with adversities and struggles. If you find yourself struggling to make your monthly mortgage payments or have fallen behind, you are possibly at risk of losing your home or will be facing a Foreclosure lawsuit. It is important you know that all is not lost and there is hope in the form of options that are available to you. One of the loss mitigation options you may be eligible for is called a “Loan Modification”.

A “Loan modification is a change made to the terms of an existing loan by a lender. It may entail a reduction in your current mortgage interest rate, an extension of the length of time for repayment, a different type of loan, or a combination of all three. It is one of many loss mitigation options possibly available to a mortgage borrower who has defaulted on their loan. Often times, a Loan Modification is confused with the Refinancing of your mortgage. When you Refinance your mortgage you are essentially replacing your loan with a new mortgage. See the difference?!

In the past, I have had clients who assume that they are automatically entitled to a Loan Modification. However, this is a misconception and no one automatically qualifies for a Loan Modification. A lender does not have to consider you for a loan modification. It is at their sole discretion. Foreclosure can be a very costly legal process for a lender and many are willing to consider loan modifications in order to avoid these costs. Though the terms of your modification are up to the lender, usually it results in providing the borrower with more affordable monthly mortgage payments. The loan modification process varies from lender to lender (servicer to servicer) and most require numerous documents (i.e., Hardship Letter, Proof of Hardship, Bank Statements, Pay stubs, etc…).

If you are currently struggling to make your monthly mortgage payments or have fallen behind, it is important to consult an experienced attorney to learn how you can protect your investment. There are several things you can do to avoid foreclosure, especially if you act as soon as possible. For more information on the foreclosure process, contact The Law Office of Ray Garcia, P.A. at 305-227-4030 or legal@raygarcialaw.com, anytime.