The idea of mortgage modification agreements is far from new, with the concept of being able to renegotiate the terms of your mortgage loan actually dating back to the Great Recession of the 1920s. This was one of the first times in American history where property values declined so rapidly, for so many people simultaneously, that they found themselves unable to pay their mortgages. Now almost 100 years later millions of citizens of the United States are finding themselves in a position where they can no longer afford their current mortgage payments, and need another option before their property goes into the foreclosure process.
In essence a mortgage modification agreement means that you can\’t afford your current monthly loan payments, so you need to have your mortgage restructured, which could include a lower interest rate, extending the actual term of the mortgage (adding more years to it), or even reducing the principle of your mortgage loan – although don\’t hold your breath on that one. The one thing you need to be really aware of this is that a mortgage modification agreement (sometimes referred to as a mortgage moratorium) is not a permanent feature in your finances, with most of them being limited to as little as a few months, but often no more than 10 years in total. That being said knowing that you can afford your monthly mortgage repayments for the next few years can and does take an immense amount of pressure off cash-strapped home owners.
Something most banks will be reluctant to mention is that signing a mortgage modification agreement will have a negative effect on your credit rating, although how much of an impact and how long the negative rating lasts is debatable. The flip side of this argument is that missing mortgage payments will be far more damaging to your credit rating, and will ultimately result in your home being repossessed by mortgage provider.
Another aspect of mortgage modification agreements is that they\’re not necessarily an easy thing to get a bank to agree to, simply because they\’re making less money from you. Ironically enough these are the same banks who were only too happy to sign you up for a mortgage in the first place, but now don\’t want to negotiate lower payments for you, even if you\’re obviously in serious financial distress. To actually get this type of financial agreement with a bank or lender means having to provide actual proof that you can no longer afford your regular payments – proof like bank statements, pay slips, etc.
So should you sign a mortgage modification agreement? The short answer here is \”Yes\”, because if you\’re even considering it as an option then you\’re already in quite a bit of financial trouble. It also means that you\’re one of the lucky few who have convinced their bank or lender to renegotiate the terms of their mortgage in the first place. Just remember that taking this path will affect your credit rating and that you\’ll need to have a very clear plan for getting yourself out of debt in the very near future too.
As with all matters which could affect your financial future it\’s important that you also seek legal professional advice on matters as serious as altering the terms of your mortgage agreement – never sign any financial documents without taking legal advice first. It\’s not uncommon for mortgage modification agreements to have a sting in their tail.