What is a Mortgage Modification Package?

Published by Thomas Herold in Banking, Economics, Real Estate

The term 'Mortgage Modification Package' is included in the Real Estate edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Mortgage Modification Package refers to an agreement that reduces the homeowners’ mortgage payments and possibly overall mortgage debt when they are suffering from significant financial struggles. The idea is to help the borrowers become capable of making their loan payments. This way they can keep their home and not forfeit it in costly foreclosure proceedings.

This does not mean that it is easy to get approved on a Mortgage Modification Package. The mortgage company ultimately will determine if they will allow for such a modification. These changes to the mortgage agreements really are to the advantage of the lender and are often in their best interest. Through helping borrowers to make their payments in a timely fashion, the financial institutions get to keep performing loans and sidestep the tremendous costs, time, and hassle of foreclosing on the property.

The name Mortgage Modification Package describes precisely what occurs in these arrangements. Current mortgage terms become modified so that the interest rate, payments, and overall final balance of the loan are manageable for the borrowers’ in question. Amounts which are past due can be paid down either utilizing installments or otherwise can be deferred to the end point of the mortgage. The repayment timeframe of the loan can be extended as well. This lowers the principle payments which are due each month. There are cases where the financial institution will even consent to writing down the remaining loan principle to a manageable amount the borrower can truly afford.

Sometimes these modifications will be temporary. This is often the case where interest rates alone are lowered. They may provide a several year break in the rate that will finally rise back to its original amount. Other times, the lender will permit the borrowers additional time to catch up the late payments without incurring additional fines and fees.

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In other scenarios, these modifications can be permanent. This is more common when the financial institutions opt to push out the loan repayment schedule or agree to write down some of the principle which borrowers owe on the mortgage. Without a doubt, such permanent changes to a mortgage are not as easy to receive as are the more temporary in nature ones.

It is not necessarily the financial institution which issued the mortgage loan in the first place which has to approve such a Mortgage Modification Package. Rather the loan servicer is the entity responsible for changing the terms of the loan. This is often another company from the one which extended the mortgage loan upfront.

Loan modifications should never be confused with refinancing, even though they have some similar end results. Both routes will make the payments more affordable in most cases. Yet in order to successfully achieve refinancing, the borrowers will require solid credit and dependable finances. In fact the majority of applicants for loan modifications do not enjoy these significant advantages.

Refinancing is instead actually closing out the existing loan and re-making a new mortgage with which to replace it. The new terms will be more beneficial. Even as borrowers had to qualify for the first mortgage, they must re-qualify for the new one. For some borrowers who are late on or are missing payments altogether (because finances are no longer sufficient to cover the obligations of the mortgage), this will practically rule out qualifying for a traditional refinancing offer.

Mortgage Modification Packages alternatively were purposefully established for those individuals who find themselves in financial straights. They will change the existing mortgage terms in order to help the borrower catch up on late payments and possibly to help make the mortgage terms overall more manageable. This arrangement can be either permanent or temporary.

The term 'Mortgage Modification Package' is included in the Real Estate edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.