We all want to own a house and it's pretty easier these days to get a loan but with the recent economic fall out, a lot of people are now worried whether they can continue paying their mortgage or not. President Barack Obama recently designed a new federal plan which is intended to help homeowners work around a new mortgage plan. Mortgage modification simply signifies a loss mitigation option that lets a borrower to refinance and/or lengthen the mortgage's term and reduce the monthly payments as well.
In a normal mortgage setup, interest and principal payments are made until the mortgage is paid off however until and unless the mortgage is paid in full, the lender or the bank holds a lien on the property. Should the borrower sell the property before it was even paid in full, the unpaid balance of the mortgage should be remitted to the lender before the lien can be released. In general, any change to the terms of the mortgage is called a modification but as the term is used, it refers to the change in terms because of the borrower's inability to pay the current required payments as stated in the original contract or agreement.
The state and federal government may arrange a mortgage modification program as voluntary on the lender's part but it may provide incentives for the lender to take part. A "mandatory" mortgage modification program obliges the lender to revise the terms which meet the criteria with respect to the borrower, the property and the loan payment track record.
Here are the following modifications that can be applied to your mortgage:
1.) Aligning the payment based on your household income
2.) Reducing the principal amount
3.) Reducing interest rate or changing the floating rate to a fixed rate
4.) Reducing late fees or penalties
5.) Extending loan term
The modification will vary accordingly and it will of course depend on your current situation or condition. Also, there may be modifications set by the lender.