What is a loan modification?

Loan modifications are a form of loss mitigation in which a mortgage lender or its servicer creates a new monthly payment for a homeowner who has fallen behind. There are a few ways that a mortgage lender can do that.

  1. Reamortization. A common way to create an affordable modified payment is to extend the maturity date of your loan.

  2. Interest rate change. Some lenders will give you a lower interest rate to reduce your monthly payment.

  3. Balloon payment. A lender or servicer might add a balloon payment at the end of your loan. This is also called “principal forbearance.”

  4. Principal forgiveness. Very rarely, a lender might write off part of your principal.

What your servicer or lender is able to do will depend on investor guidelines as well as certain ratios and formulas that lenders look at to determine whether a modified mortgage payment would be affordable.

You can book a free 15-minute consultation or email us to learn more.

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My forbearance is over. What do I do now?