When a household is experiencing some financial trouble, or when certain circumstances change dramatically, the existing mortgage that is held on a home might become impractical to maintain. In these cases, two of the most popular options that can help are known as loan modification and refinancing. Both options can help to reduce the monthly payments that are due, but each comes with its own set of rules. Not everyone will benefit from refinancing, and loan modifications might not be the solution that some households are looking for.

Refinancing a mortgage is a process that is done through a mortgage provider, although it does not necessarily have to be the institution that provided the current mortgage to the borrower. When a mortgage is refinanced, an entirely new mortgage loan is drawn up and signed. This completely nullifies the previous mortgage, so there is no liability to the old terms. The advantage with refinancing is that the new loan can be adjusted for several different factors that are present in the current market such as lower interest rates. A mortgage can also be refinanced through a completely different lender, making it possible to shop around for the best rates and offers.

Unfortunately, refinancing has several limitations and restrictions that can be disqualifying, especially for households that are in financial trouble. Since the refinancing involves acquiring an entirely new loan, the borrower must qualify for this new loan with their current assets. There can also be upfront fees or closing costs associated with the new loan. The home that is in question must be re-assessed to determine its current market value, and if a home has depreciated then it might make refinancing impossible. A variety of other factors such as personal income, other loans or mortgages, and problems on a credit report like late payments can all exclude refinancing as an option.

Unlike refinancing, loan modification is a solution that works with the existing mortgage that is attached to a home. Modifications can only be made by the institution that issued the original loan, and in some cases they are tightly regulated by state laws. For the most part, a loan is modified for only a short or defined period of time during which a lower interest rate can be paid. After this time has ended, the original terms of the mortgage are reinstated. In a few areas, there are regulations that explicitly state that any modifications that are made are applicable for the entire life of the loan. Since there is no need to have a home reassessed or to hold the borrower to any higher standards than those they have already been met, modification is often an answer for homeowners who do not have the resources to refinance.

Modifying a loan is usually done with the help of a skilled loan modification attorney. These individuals are aware of the laws and regulations associated with the modification process and can help to guide a borrower through the procedure so they receive the most favorable terms available. It can also be important to work through a loan modification attorney because the overall process can take several months and require multiple meetings and filings to complete. During this period, an attorney can help the borrower to meet filing deadlines and to avoid missing procedural steps that could threaten the acceptance of the loan modification.

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When a lender discovers that a borrower is not able to make the regular monthly payments on a mortgage, the lender will often try to find ways to work the situation out to the bank's advantage and may not always be as beneficial to the home owner. In many cases, foreclosing on the home is not in the best financial interests of the lender and borrowers can instead work out a loan modification agreement.

Those who are not yet in financial trouble and have just taken on a mortgage should try to gather all of the documents related to correspondences between the lender and the borrower, including the envelopes that the correspondences came in. Certain documents are ineligible if the postmark is not available. Borrowers should also keep all paper related to financial information so that they can use this information when trying to paint their financial situation to the lender in the event that a modification is necessary.

The most useful financial information to keep is anything that indicates that the borrower is suffering from financial hardship. This can include utility shutoff and employment layoff notices. Records that document all loans and expenses can also help the debtor.

Those who wish to have their loans modified need to get in contact with the lender's loss mitigation department and try to avoid the collections department. The collections department usually does not want to transfer the borrower to the loss mitigation department, which is more likely to try to help the borrower avoid foreclosure. However, having a loan modification attorney can make it easier to get through to this department. An attorney often has contacts with those in the loss mitigation department of the bank.

Another approach is to try to get in contact with a live person on the lender's phone system who will be willing to transfer the borrower to someone in the loss mitigation department. Usually, there are multiple tiers in the department and the individuals in the lowest tier have no decision-making authority. These individuals will often try to collect from the borrower and are much more likely to work with a loan modification attorney.

The loss mitigation department will want all of the financial information that the borrower should have gathered and will use this information to make a decision on whether they will modify the loan and how they will do so.

Another thing that will be needed to get a loan modification is good faith money. This is often a portion of what the debtor owes in attorney and delinquent fees. Those who spend all of their money to pay off debt when they are behind on their mortgages sometimes have no money to work with when they try to negotiate a modification and are not able to qualify for the modification. This is one additional reason to contact a loan modification attorney to act on your behalf when seeking a loan modification.

If a borrower speaks to a loan modification attorney to ensure that the modification they get is actually a good deal for the borrower. Some poor loan modification plans will only temporarily forestall a foreclosure to get the most money out of the debtor.

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Loan modification is a process that a lender and a borrower can enter into together that will change the actual terms of a loan so that the borrower is able to make the monthly payments. Modifying a loan is different from refinancing a loan because the actual terms of the existing loan are just re-negotiated instead of having an entirely new loan written. Banks will look at several different aspects of an individual’s finances before deciding whether a modification can take place.

There are three criteria that can qualify a household for a modification on an existing loan. The first is a personal hardship which has caused a person to become unable to make the monthly payments. The second is a quantifiable financial problem that has not yet affected the ability to make payments, but that will shortly make it impossible. Finally, banks can look at the debt to income ratio of a household to see whether changing a loan will benefit the borrower.

The debt to income ratio is the amount of debt that a person owes in relation to the amount of income over a given period. Banks that are determining whether to perform a mortgage modification will generally look at the front-end debt to income ratio. This is a number that is calculated using the borrowers income and only the remaining amount of the mortgage that is owed. It does not include other expenses.

The back-end debt to income ratio is calculated using all of the debts that a person owes including utility payments and money spent on food. For a household that is in financial trouble, this could be a negative number because the amount of debt each month exceeds the amount of income. Back-end figures are used to assess risk and are also used to determine how much extra income a person will have under the new terms of the loan.

The debt to income ratio requirement for a loan modification varies greatly from one bank to another. The required front-end ratio can be very lenient and in the 50 percent or higher range. More commonly, however, lenders are looking for lower debt ratios. A household with a very high debt ratio might have difficulty acquiring any help without a loan modification lawyer. This is because banks sometimes look at a high debt ratio as being an indicator that an individual will eventually be unable to make monthly payments on time.

There are several government programs such as the Affordable Modification Program (AMP) that actually set guidelines that banks must follow if they choose to participate in the program. These guidelines usually require a front-end debt to income ratio under 30 percent and a back-end ratio under 55 percent after the new terms have been applied. The banks are also required to extend the loan over a 10 year period. The knowledge of a loan modification lawyer can help a household to navigate the sometimes confusing legal and financial areas involved in acquiring a loan modification.

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When you are approved for a loan modification there is little chance of receiving a modification for a second time. Some lenders may have company policies that allow for a second time loan modification, but these lenders are few and far between.

Under the government's Home Affordable plan, you will not qualify for a loan modification through this program if you have ever had your mortgage modified before. This is one of the first rules established with the program. It is for this reason alone that when you apply for a loan modification you get it right the first time.

Loan modifications consist of a lot of paper work. Lenders want to review your financial situation to determine where the loss of income came from, will it be permanent and will you be able to pay the mortgage once the loan is modified. If you are not comfortable with managing paperwork, like many of us are not, it is advisable to seek a loan modification attorney to help with the program.

Using a loan modification attorney will alleviate any problems with the paperwork and documentation of the facts. It will also pass the responsibility of getting the loan modified to the right amount to a professional. There is not a second time when it comes to loan modifications; it must be done right from the beginning.

A loan modification will reduce your debt burden by decreasing the interest rate on your loan and possibly reducing the amount that is owed. Homes that are in default status can be made current again by being approved for a modification. This program is that important, but it is also very strict. You must complete everything correctly, comply with response times and adhere to the repayment plan to benefit from it all.

This program can help you overcome your current financial difficulties. It can place you back on the road to stability, and will allow you to stay in your home. However, you must remember that there is no second time around; the application and follow up must be completed correctly the first time.

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With today’s dismal economy many people have had to make tough decisions regarding the sale and the financial debt of their homes. Unfortunately many people are unable to afford their homes anymore and must turn to their lenders for some relief. Making decisions such as these are never easy and can be rather confusing. Certainly though there are many options available to homeowners now to help them should they not be able to afford their mortgage payment due to reduction or loss of income. Two of the most common avenues people have chosen are mortgage modification and short sale.

A short sale is one choice homeowners make when they want to get rid of their current home but due to the reduction in market values cannot sell the home for as much as or more than what they owe on it. So homeowners will make a deal with the mortgage company to sell the home for less than what is owed on it. The mortgage company or lender will agree to take whatever you sell it for and release your liability. Even though this may seem like a blessing there are downsides to a short sale. One of the most common complaints is that the process takes a long time. For people who need to have things wrapped up quickly this will not be your best option. However, a short sale is better on your credit than a foreclosure. Even though a short sale will still affect your credit negatively it will not be as adverse as a foreclosure which makes a better option for some.

The other route many people take is a mortgage modification. With a mortgage modification a homeowner works out a deal with the mortgage company which will enable them to afford their payment and keep their home. Most times this includes changing the terms of the loan such as the interest rate or loan length. This of course will be the best option for ones credit overall.

Needless to say going through financial difficulties with your home is a tough situation to be in. The choices you make regarding it will affect your life in many ways. Thus, deciding which option is best for you can be difficult. As a result it would be best to consult a loan modification attorney so they can help you with decide which option will be best for your situation.

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Since the advent of the Obama Administration’s HAMP program for home loan modifications, many loan modification companies have opened their doors to the public. The goal of hiring a loan modification company is to assist in the completion of the proper application and supporting documentation, so you will have a better chance of obtaining a home loan modification.

A professional, reputable loan modification company can make a difference. In April, 2010, the Treasury Department announced that 277,640 trial loan modifications were cancelled in April 2010, many due to lack of documentation or relapses in missed payments. An experienced loan modification company can help avoid these situations.

Some loan modification companies are staffed by employees experienced in the real estate or banking industry. Many others are not so reputable, seeking only to take a customer’s money, without providing much in the way of service. Some will only assist in preparing the application, leaving you alone to negotiate with the bank.

In a public statement last year, the Federal Trade Commission promised to crack down on some of the disreputable loan modification companies. Most states have now enacted legislation requiring the licensing of companies dealing in mortgage loans, including loan modification companies.

The problem is the FTC doesn’t have the resources to check every loan modification company. A disreputable loan modification company may disappear before you have time to file a complaint. Be very wary when deciding to use a loan modification company.

At Cdloanmod.com, our network of attorneys have experience dealing with the home loan modification process. We are governed by a standard of ethics arguably higher than regulations given to loan modification companies.

We help prepare the application, know what supporting documentation is required for your home loan modification, and will represent you throughout the process. We will review your case from a legal perspective. The attorney is experienced in dealing with lenders, and will help you prepare your application so it is processed quickly.Complete our form online for a free loan mod consultation to determine your eligibility and let us put you in contact with a Loan Modification Attorney. Or you may give us a call at 888-595-9111 if you have any further questions.

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Having a troubled mortgage is enough reason to worry, but single mothers have it a whole lot tougher. With children to feed and just one income to live on, the burden of an underwater mortgage is magnified. Thankfully, the government’s loan modification program offers a viable solution—and being a single mom gives you a definite advantage. Read on to find out how single moms can qualify for loan modification and make the most out of government aid.

Proof of hardship
Being a single mom makes a much stronger case for financial hardship. Lenders tend to be more lenient on borrowers in really tight situations, so the fact that you have a single income can actually increase your chances of getting approved. Write a convincing hardship letter that not only appeals to emotion, but also logically explains how you fell behind and how you plan on getting your mortgage back on track.

Income sources
A steady income is one of the main requirements for a loan modification. As long as you have a stable source of revenue, your bank won’t consider you a risky borrower and will be willing to help reinstate your loan. Besides your job, take into account other income sources such as child support and retirement plans. The latter can actually help a great deal as it indicates long-term stability—it tells the bank that even if you lose your job or get demoted, you have a financial cushion to fall back on and will be able to keep up your modified loan.

Financial documents
Your bank will also want a clear picture of your current financial situation. This will allow them to see whether or not a loan modification is really your best bet, and if not, which solutions make a better fit. Each lender has a different set of requirements, but most of them will need your latest mortgage bills, tax returns, pay stubs or other proof of income, and recent bank statements. You can also include bills for your child’s medical and school expenses, if they help support your loan modification hardship letter.

Professional advice
The best way to ensure your chances is to work with a loan modification attorney. He or she will help you plan out your application and get results that really fit your profile as a single parent. Not only do you get to negotiate better with your bank, you also get a loan modification that works for you in the long run.

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