how loan modification works
although a loan modification may be made for any type of loan they are most common with secured loans such as mortgages 1a lender may agree to a loan modification during a settlement procedure or in the case of a potential foreclosure in such situations the lender has concluded that a loan modification will be less costly to the business than a foreclosure or a charge off of the debt a loan modification agreement is not the same as a forbearance agreement a forbearance agreement provides short term relief for a borrower with a temporary financial problem a loan modification agreement is a long term solution a loan modification may involve a reduced interest rate a longer period to repay a different type of loan or any combination of these there are two sources of professional assistance in negotiating a loan modification federal government assistance is also available to some borrowers mortgage loan modifications are the most common type because of the large sums of money at stake during the housing foreclosure crisis that took place between 2007 and 2010 several government loan modification programs were established for borrowers some of those programs have expired but government sponsored loan modification assistance is still available to some borrowers these include some traditional lenders have their own loan modification programs a mortgage loan modification application will require the details of a borrower s financial information the mortgage information and the specifics of the hardship situation each program will have its own qualifications and requirements these are typically based on the amount the borrower owes the property being used for collateral and specific features of the collateral property if a borrower is approved the approval will include an offer with new loan modification terms 