There are many reasons why homeowners may face financial difficulties that affect their ability to make ongoing mortgage payments. The loss of a job, a serious illness, or unexpected expenses may cause a person to default on their mortgage, and they may be facing the threat of foreclosure. To prevent the loss of their home, a person will want to understand the available options, which may include negotiating loan modifications with their mortgage lender.
Options for Loan Modifications
In many cases, lenders will be open to working with debtors to determine how the terms of a loan may be adjusted. A foreclosure can be expensive and time-consuming, and a lender may not be able to recoup its losses after taking possession of a home and selling it to a new owner. As an alternative, a lender may make modifications to a mortgage loan that will ensure that a borrower will be able to make ongoing, affordable payments. Multiple types of loan modifications may be made, including:
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Forbearance - If a person is experiencing temporary financial hardship, a lender may agree to “pause” mortgage payments for a certain period of time, or the amount of monthly payments may be temporarily reduced. After the end of the forbearance period, payments will need to be made up. In some cases, the amount due may be paid in a lump sum, although it is more common for lenders to create payment plans or to add additional payments to the end of the loan.
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