Mortgage lenders use loss mitigation methods to reduce their potential losses and mortgage modification is one of the methods used.

Contrary to what many people think, mortgage lenders do not want a borrower’s house. Instead, mortgage lenders want their mortgages paid. Unfortunately, bad things such as serious illness, loss of job, etc. happen and some people find it difficult to pay their mortgage payments. Obviously, when a mortgage lender is not paid, the lender begins to look for ways to get paid, even if it means foreclosure.

But again, contrary to what many people think, mortgage lenders would rather save a mortgage loan than go through the foreclosure process. Foreclosure can be expensive because, in addition to court costs and attorney fees, the mortgage lender has to take care of the property and find a buyer. The lender may have to hold onto the house for a long time or reduce the price to an amount less than what it is owed. In other words, the lender can suffer a loss on the sale of a house.

To save a mortgage, lenders can work with borrowers. To be honest, not all mortgage lenders are willing to work with or help borrowers. But the lender who are willing to try to save a mortgage loan may consider mortgage modification.

Mortgage modification is nothing more that modifying or changing the terms of a mortgage loan. If both the mortgage lender and the borrower agree, they can modify:

- the interest rate

- the duration of the repayment time

- the property which secures the mortgage

- any other terms to which the parties agree

Reducing the interest rate will obviously reduce the monthly payments unless the length of time to pay the loan is shortened. A 6% loan for 30 years is less per month than a 7% loan for 30 years if the same amount is borrowed in both cases. However, the monthly payments on a 6% loan for 15 years is more than the monthly payments on a 7% loan for 30 years when the same amount is borrowed in both cases..

By the same token, extending the length of time to pay a loan will reduce monthly payments as long as the interest charge is not increased. The monthly payment for a 6% loan for 30 years is less than a 6% loan for 15 years.

In certain situations, a mortgage lender can either lower the interest rate or lengthen the payment time. However, it is difficult for lenders to lower the interest rate to a rate lower than the going interest rate. Also, lenders cannot extend the payment period to over 30 years.

If your mortgage lender and you agree to modify the terms of your home mortgage, be sure that you understand the terms of the mortgage modification, that the modification is in writing, and that the modification is filed on the public records in the same manner as the original mortgage.

Loss mitigation mortgage modification can help both your lender and you by saving your mortgage loan, help you pay your monthly mortgage payments, and avoiding or stopping foreclosure.

This is general information. If you need specific information or have any questions of any nature whatsoever, talk with a lawyer licensed in your state.

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By: Steve Bingman

About the Author:
Stop! Don’t blindly chase any option to stop, avoid, or prevent foreclosure. See what works at Stop Foreclosure – Five Options You Need To Know. And click here for more insights on loss mitigation.