Mortgage modification can save your home from foreclosure. It's an arrangement in which both lender and borrower agree to change the parameters and conditions on a mortgage. This change most likely involves lowering the interest rate associated with the loan, but it could also be extending the loan term, or even decreasing the principal balance. Fact of the matter is that mortgage modification should make a loan more affordable for the borrower, so that foreclosure can be avoided which is of best interest for both sides.

It might sound hard to believe but the truth is that the current economical situation puts borrowers in a better position in terms of getting a mortgage modification. Lenders are now more open to such requests, because of all that has been going on in the housing market. Housing prices have been going down since 2006 and the increased number of foreclosures pushes them even further. Because of that, lending companies can make much higher profit by getting all the repayments on a loan, even if the interest rate is lowered, compared to foreclosing the house and then trying to sell it when the both prices and demand are low right now.

How the Process Works

Some borrowers have a very good chance of having their request for mortgage modification accepted, but still, there is an application process that has to be completed and certain requirements that must be met. What has to be proven to the lender is that the borrower is in a difficult financial situation making him absolutely unable to repay the loan at the given rates and terms, therefore a mortgage modification would be the only possible solution. That's the reason why a hardship letter has to be written and sent to be lender along with a financialstatement. In addition to that, the lending company has to be convinced in the borrower's ability to make the monthly repayments under the new, modified loan conditions. This is achieved by providing a proof of salary.

Writing A Financial Hardship Letter

The financial hardship letter has to inform the lender of the exact reasons that make you unable to cover the repayments on a loan. Try to be on-point, clear and honest when describing your situation. Your style of writing can make the difference between having a mortgage modification request accepted or denied. So try to make it straight and clear, and give a detailed explanation with proven facts confirming your status. The whole idea is that you have to convince the bank that mortgage modification is the only solution and you can get back on track if the request is accepted. Health problems, loss of family member, legal expenses or natural disasters are some of the reasons that are seriously considered by lending companies.

Preparing Your Financial Statement

A financial statement should serve as evidence, confirming the borrower's ability to pay under the new, improved terms, if of course the mortgage modification request is accepted. It should contain detailed information on all monthly earnings and expenses. Obviously, the financial statement should indicate a positive monthly balance, but all the numbers should be  reasonable and realistic.

Proof of Salary

A paycheck stub can be used as proof of salary, or a checking account. This document has to prove the borrower's monthly earnings given in the financial statement. It should also show confirm that those are constant earnings received on monthly basis, so frequency of earnings has to be included too.

Conclusion

Bottom line is that the current state of the economy has made lending companies much more open to mortgage modification requests, so borrowers have a really good shot at it, as long as the application process is done properly.