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Loan Modification

Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.

  • Interest rate reduction - The lender lowers your interest rate to make your payment more affordable.
  • Lengthening the amortization period - The lender lengthens the repayment period from 30 year to 40 years.
  • Interest only payment - The lender reduces your monthly payment by giving you an interest only loan usually for three, five or seven years
  • Forbearance Agreement - A forbearance allows the borrower to put a temporary hold on his or her monthly payments, usually for up to one year.
  • Forbearance is common for unemployed people or where the lender wants to wait and see that you make three or four continuous payments before a full loan modification.
  • Recapitalization of past due payments - The lender modifies the loan balance to get you current so that you don't have any late penalties or fees or mortgage late payments reported anymore.
 
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