The process of loan modification has been in existence since several decades. Yet most people don’t know the entire truth about it and how it works. The lack of knowledge regarding the loan modification process makes it confusing and more frustrating for those house owners who are faced with the threat of foreclosure. To make the most from this process you should have a lot of knowledge about the process so that you can exploit the legal loopholes to save your house. Being informed about the process will also prevent scammers from taking you for a ride and rob you off your hard earned money. There are many websites and books which will provide you with accurate information regarding foreclosure. Given below are eight questions asked about loan modification.

1)    What exactly is loan modification?

It is a modification in the terms and conditions of your loan which is permanent. Therefore, the debt has been restructured in such a way that the debtor is able to pay it.

2)    Will late payment charges be included in the restructured loan?

As per the law the accumulated late payment fees must be waived off. However, the new agreement can contain late payment fees.

3)    How can I get loan modification using the government programs?

The U.S. government has set aside seventy five billion dollars to compensate for those lenders who allow their debtors to modify their loan agreements. This is a great motivation for the banks to modify your loan so that you can pay it back. Also, those owners who don’t default on their monthly instalments again are eligible for a $5000 discount on the loan balance.

4)    When will I be eligible for the loan Modification?

The most significant criteria are: whether you will be able to pay your instalments after modifying the loan. You should prove to your lender that you will make the monthly payments with out defaulting if your loan is modified. The accepted documents for proving your self are financial statements, receipts or any other documents which can show that you are capable of making payments.

5)    Do I have to be a defaulter to become eligible for loan modification?

No. It is better that you contact your bank when you see the first sign of financial problem. Most banks encourage those borrowers who have not yet defaulted to come for loan modification.

6)    What are the situations that will make the bank agree that the borrower is facing financial trouble?

Every borrower has his own set of problems. But, banks accept reasons like military service, job relocation, illness, death of spouse, decrease in income and divorce, among others.

7)    Can I prevent a foreclosure by modifying my loan?

Prevention of foreclosure is the primary aim of loan modification. Therefore, you can save your home. However, if you default on payments even after loan modification then you cannot be saved.

8)    Can defaulted payments be included in the modified loan?

This is left for the lender to decide. However, if he wants to he can add the defaulted payments to the modified loan.

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