The current economic environment has made it difficult for many families to keep up with their monthly payments. As such the number of loan modification requests has increased substantially in recent times.

The loan modification process can be time consuming, frustrating and confusing to homeowners, so it is important to gather as much information as possible before you start. It may however be your final step to avoiding foreclosure.

A loan modification is the process of changing the conditions to an existing loan. These changes to the loan´s terms will become a permanent change to the loan agreement.

The reasons that make, both borrowers or lenders, want to make loan modifications to an existing loans is to prevent the borrower from defaulting on the loan. The changes to the loan are made with the intention of making the monthly payment easier on the customer.

During the loan modification process a lender can not access late fees to the borrower.

Since loan modifications are positive for lenders, borrowers, and the economy in general, and in order to reduce the amount of loans that go into foreclosure, the Federal Government has created a program that offers monetary incentive for lenders that accept loan modifications. There is also a financial incentive for borrowers to make timely payments on the new modified loan in the form of a credit to the loan balance.

If you qualify, a loan modification will lower your monthly payment, using one or more of these options:

• lower interest rate on the loan
• longer repayment period
• or a partial reduction in the amount owed
  

Before beginning the loan modification process, you should make sure a few conditions are met.

First you should make sure that your income level qualifies. The lender will want to make sure that you make enough money to meet the new monthly payments. You will also need to show why you need to make loan modifications. What specific set of circumstances lead to your hardship situation. Was it a divorce, sudden illness, loss of income or another type of situation.

You do not however need to be delinquent on your current mortgage to qualify for the loan modification program. The idea behind the program is actually to find people before they face financial hardship. If however you are behind on your mortgage, the back payments will be added into the new repayment plan.

The Presidents Home Affordable Modification Plan is intended to help American homeowners that are on the risk of falling behind on their mortgages, are already behind on their payments, or are at risk of seeing their homes foreclosed.

Most lenders are participating in this federally funded program, and if you think that you might qualify, start the loan modification process before it is too late. The entire process takes some time so if you are facing hardship, or think that you will not be able to meet future payments, get the process started as soon as possible.  Talk to your lender, you don´t even need to have a lawyer to start the process.