.How can a loan modification help you? What can be included in a loan modification?

A loan modification is the re-writing of the original loan terms to reduce the monthly mortgage payment and make it more affordable. Nevertheless there are a few stipulations in the loan modification process some of which benefit the borrower and some benefit the lender. According to Mortgagee Letter 2008-21 for loan modifications where the borrower’s principal balance is reduced to the value of the property legal fees and other costs related to the foreclosure process applicable to the current default episode may be added into the modified principal balance.

In other words, your principal balance is reduced to the value of the home, but any costs accrued by the lender during the modification process will be added to the balance. Although this may seem like a downfall for the borrower, it is likely that the costs of the loan modification are much less than the previous balance prior to the modification. A loan modification is not the best option for all homeowners struggling to make their monthly payments, but for those who are committed to staying in their home this is the way to go.

Borrower’s often wonder what will happen to their late charges if the decide to go with the loan modification option. According to Mortgagee Letter 2008-21 lenders are supposed to waive the late charges during the modification process. So, if homeowners are eligible for a loan modification and, are committed to staying in their home than the modification is the way to go.