Chelsea Newman

The goal of loan modification is to decrease the homeowner’s loan payment and make the settlement more cost effective. This can be accomplished by utilizing one or more of the following: Reduce the rate of interest; prolong the term of loan; add the unpaid interest to the principal balance; and lessen the principal balance. On the other hand, in most cases loan modifications may also result in a bigger payment. This could sound unusual to the client because this is contrary to the way a loan modification is intended to function. Not all banks may provide a loan modification that lessens a homeowner’s mortgage payment. Several banks may offer a loan modification that raises the settlement. The basis for this is, banks use ratio which often cap out at 38 percent of gross monthly revenue in identifying the new mortgage payment. If the financial statement warrants, the bank may ask for increased settlement.