ARM Mortgage Loan Modifications

Adjustable mortgage loans (ARMs) were very popular several years ago during the housing boom because they provided the borrower with low payments. Many of these mortgages were also sub prime mortgages, so they were easy to qualify for. The idea was that a borrower could always refinance later if interest rates rose by taking advantage of the equity they had built up in the home. However, the housing boom also saw an increase in construction and there became a glut of housing on the market. Property values started to drop and many borrowers with ARMs found themselves in the situation of owing more on their home loans than the value of the house.

The sub prime market began to fall apart and credit tightened. This left many borrowers unable to refinance their mortgages and with interest rates that were resetting at higher interest rates. Many borrowers could not afford the higher payments and foreclosures soared at an alarming rate.

Lenders and the federal government have responded to this crisis and loan modifications are now an option for many holding an adjustable rate mortgage. A loan modification changes the terms of the loan so that the monthly payments are more affordable. This can be accomplished through lowering the interest rate, lengthening the payment term on the loan, partial principal forgiveness or changing a loan from an ARM to a fixed rate mortgage.

The federal government is encouraging lenders to offer loan modifications, particularly ARM mortgage loan modifications. The new Homeowner Affordability and Stability program even gives lenders a $1000 per loan modification to provide incentives for lenders to help troubled borrowers to help stabilize the mortgage industry and financial markets.

If you are a homeowner with an ARM mortgage loan struggling to meet your monthly payments, you may qualify for a loan modification. You can check with your lender to see what the eligibility requirements are and what the application process is. You may be eligible to change your loan from an adjustable rate mortgage to a fixed rate. You may also be eligible for an interest rate reduction or even some principal forgiveness if you are upside down (owe more on your loan than the value of your house) on your loan. Before submitting a loan modification application, make sure you become familiar with the loan modification process and your lender's requirements. A loan modification can help save your home from foreclosure and save you thousands of dollars on your mortgage so it is definitely something to consider if you are struggling to meet your monthly mortgage payments.