Mortgage Modification: The Good, the Bad, and the Ugly

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Mortgage modification is growing in popularity with more and more people facing foreclosure. Banks are turning to this method as an alternative to foreclosure and in some cases it is a good thing. Mortgage modification can help you under the right circumstances. However, you will want to make sure that you are getting the best deal before agreeing to anything. Here is the good, the bad, and the ugly about mortgage modification.

The Good
The good thing about mortgage modification is that it can help you stay on your feet. Mortgage modification is designed as an alternative to foreclosing on a house or filing bankruptcy. If you are in deep, you will need help from somewhere. If you have to foreclose on your house, it will hurt your credit badly. You might not be able to buy another house for years. Therefore, anything you can do to get out of foreclosure is a good thing.

Modification can help you by lowering your interest rate, lowering your payment, or getting rid of late payments for you. If you are behind on your payments, it can seem very overwhelming. If the mortgage lender is helpful, it can be a great asset to you and your financial situation.

The Bad
Mortgage modification is not always in your best interest. If you can leave your mortgage alone and avoid modification you will usually be better off. A mortgage modification usually will negatively affect your credit. Anytime you do not pay off a loan like you agreed to pay it off, it can be reported to the credit bureaus. Usually you will have many late fees and missed payments if the house is close to foreclosure. Therefore, your credit score can be negatively affected from the mortgage modification process.

The Ugly
Sometimes, mortgage modification is a big mistake. The mortgage lenders may just be in it to help themselves out and they don't care about you. When this happens, just stay away from their offers and stick with your loan.

One such example is in the area of blind loan modification. Blind loan modification is when the bank sends you an automated offer that is designed to get you to modify your loan. It will come with some seemingly attractive terms that entice you to accept the offer. However, when it comes down to it, the offer is not in your best interest. It is designed to help the bank in the long run and make them more money.

The bad thing about blind loan modification is that the offer is generated by a computer instead of by a person. It is not a special offer that was designed on your behalf from the bank. The bank will not be able to discuss it with you in detail. They just want you to accept the offer and start making your payments. Make sure that you understand what you are agreeing to with these types of deals.