What is a Mortgage Loan Modification? 
A loan modification is when your servicer or lender re-negotiates the terms of your original mortgage loan. There are several ways in which they modify the loan:

• Lowering of interest rate 
• Fixing an adjustable rate to a lower fixed rate 
• Adding missed payments to the end of the loan 
• Extending the term of the loan- 30yr to 40yr term 
• Forgiving missed payments 
• Forgiving 2nd mortgages

Why Banks Modify Mortgage Loans? 
Lenders will modify a mortgage loan when a homeowner is facing a financial hardship and will have difficulty making payments. Many homeowners have no other financing options because they 1) do not have equity in the property, and 2) their credit has been so adversely affected that they are unable to qualify for a typical refinance.

It is to the lenders benefit to modify a delinquent mortgage loan because the foreclosure process is a very lengthy and very costly procedure. Experts estimate that a typical foreclosure cost approximately 40% to 60% of your mortgage loan balance. If the lender can offer a homeowner new affordable terms, they can recover the missed payments over time through interest payments.

Foreclosures are such a serious problem that the US Government has raised nearly a trillion dollars to assist lenders with loan modifications. Tax dollars are now being used to help the banks perform mortgage loan modifications at little or no cost to the homeowner. The banks only receive these funds if they agree to modify mortgage loans for struggling homeowners.

Loan Modification Companies- Beware of Scams 
I would like to take a moment to discuss the Loan Modification companies. You have probably seen the numerous commercials and heard the radio advertisements. In our opinion, the majority of these companies are overcharging for a service that is free, and many are downright fraudulent. They prey on the fears of struggling homeowners. They tell horror stories about apartment living… how your credit will be ruined… how your children will suffer not having a yard, or switching school districts. They will say anything to get your money. These Loan Modification companies hire ex-loan officers and call them “specialists”. These are the same people that misled you into signing the loan that you currently can no longer afford. Do not allow them to make a second commission on you!

Beware of the “Money Back Guarantee” 
They will further entice you with a “money back guarantee”. This guarantee is worthless. Many companies refund policies do not include a ‘processing fee’ that can be as high as $1000.

Source

For more information please visit: http://www.floridalawattorney.com