In the aftermath of the sub-prime mortgage crisis that sparked the infamous and earth-shattering global financial crisis, the government has started up many programs aimed at helping individuals modify whatever loans they may have so that they are able to stay current on payments and, in the case of mortgages, avoid foreclosure. The term loan modification is usually used in relation to home mortgage loans but any loan can be modified, provided that both the lender and borrower agree to the changes. A modification to a loan occurs when the terms of the loan are changed beyond the terms originally agreed to by the parties involved.
Loans are usually modified when the borrower is unable to stay current on the original agreed payments. They are modified so that the borrower is able to meet these periodic payments and can be done in any number of ways including reducing the initial principal of the loan, extending the length of the loan term and reducing the interest rate or changing how it is calculated. The Federal program used to help modify loans depends on what situation the person in question is in – such as whether they are current or late in their payments or whether they are in default or bankrupt. There are many Department of Housing and Urban Development approved not for profit counsellors that can give you advice and help you get a loan modification. They work for free and if you come across someone offering to help you but only for a fee you should be wary. Many “foreclosure rescue” entities have sprung up in the wake of the mortgage crisis and a majority of them are scams. As a general rule, if you are being asked for a fee, it is most likely a scam because government counsellors work pro bono.
