Loan modification and loss mitigation strategies
Loan modification is an agreement negotiated with your present lender that changes the terms of your existing loan.
Lenders are ready to negotiate when they are sure you are facing financial problems and are unable to handle the existing loan. Once the creditor is convinced he may reduce the interest rate, reduce monthly payment amount or change other loan terms.
A loan modification takes place only when both parties agree to it. This is done with the hope that the borrower will now be able to fulfill his obligations.
Be very cautions when you apply for loan modification as every word you speak can be used against you.
Before applying for loan modification you also need all the documents related to the loan beginning from the correspondence before the deal. Collect your 3 years tax returns + bills paid or not paid from the time you were falling behind including utilities, auto payments, credit cards, student loan, medical bills etc. You need documents of reasons why you fell behind.
Once your lender is willing to modify loan, consider his offer before responding. Do not make any agreement that you might not be able to fulfill or fall behind. Think 100 times. Consult any attorney, accountant and a person who has proper knowledge about mortgage. Then make a deal.
Normally the lender spreads the door for a little longer period adding the penalty. This makes it slightly easy for the borrower but he has burden of loan for a longer period.