Loan Modification Fundamentals Can Help People Maximize OptionsMarch 22, 2012 — 1,156 views
Loan modification can be a challenge to borrowers and lenders, and understanding the process can help people who are modifying loans in several ways. Knowing the options available makes it easier to find solutions that can benefit you and your financial institution.
Difficult economic conditions may lead people to default on loans. As a result, many banks have foreclosed on these homeowners' properties. The Mortgage Bankers Association (MBA) notes that one out of every 200 U.S. homeowners faced foreclosures in 2009.
However, people can avoid bank foreclosures with loan modifications. Lenders can reduce the interest rate of a loan to the current market rate through this process. Doing so provides an opportunity to take advantage of low interest rates, which are a common feature of a problematic or recessionary economy. In such a situation, you may consider a loan modification to change the terms of your existing allowance.
For example, a bank may extend the length of a loan so a person can make lower monthly mortgage payments. Changing the terms of a loan can benefit lenders and borrowers in this scenario, ensuring homeowners can pay off a loan and banks can avoid the complicated foreclosure process.