The Pro’s and Cons of Loan Modification

One positive aspect of loan modification is that it is saving many homeowners from foreclosure. Over the term of a 30 year loan the homeowner will end up paying their lender almost three times the amount originally borrowed. If the lender forgives a few missed payments, drops the interest rate or lowers the principal balance, there is a good chance the borrower will be able to stay in the loan and in their home. There also is a good chance that if a lender proceeds with a foreclosure, they will typically lose money with no possibility for profit, especially when clients owe more than the home is worth. By negotiating, the bank maintains a profit, families can keep their home, and the surrounding neighborhood’s value is protected by stopping the foreclosure and subsequent short sale. Further, loan modifications can help the real estate economy and may help to stabilize the volatile mortgage situation.

Along with great outcomes, there also are horror stories when it comes to loan modification. Many homeowners have tried to modify their own loans with little success. Others have been bilked by unscrupulous companies that were only interested in the up front fees. When choosing a loan-modification company with which to work, borrowers must do their research to ensure they are dealing with a legitimate company. Most companies typically offer no guarantees for a positive outcome. In addition, borrowers must realize that most lenders will only allow one resolution. So it is imperative that their case be presented properly the first time. Choosing a legitimate company can help ensure that this happens.