 TITLE: How Can I Get a Mortgage Modification? CONTENT: A mortgage modification is a significant change your lender makes to your loan terms when you are about to miss a payment or after you've missed one or more mortgage payments. Lenders use different methods to modify mortgages, but the main goal is to prevent foreclosure so you get to stay in your home and the lender avoids the expense of seizing and reselling the property.\nQualifying for a mortgage modification typically requires that you demonstrate a significant hardship. If you're looking into a mortgage modification, make sure your lender offers this option, as not all do.\nEntering into a loan modification will likely have a negative effect on your credit, but it will be less severe than you'd see with a foreclosure—and you can take steps to improve your credit that will help you get back on track.\nA mortgage modification will lower your monthly payments, though it may result in greater total costs for you over the lifetime of the loan. If you qualify for a mortgage modification, your payment reduction may be achieved through any of several methods, including:\n*   **Reducing your interest rate**: Cutting your interest rate by several points can lower your monthly payment significantly. Rate-reduction modifications often use a step-up approach, in which your interest rate and monthly payment amount increase periodically (typically every five years) for the remainder of the loan's lifespan.\n*   **Extending your repayment period**: Stretching out your loan repayment over a longer period of time will reduce your monthly payments. Just keep in mind that doing so may significantly increase the total amount of interest you pay over the life of the loan. If your situation changes and you're able to afford a higher payment, however, you can consider refinancing to a loan with a better rate.\n*   **Converting from an adjustable to a fixed interest rate**: If your financial hardship is related to periodic payment increases associated with an adjustable-rate mortgage (ARM), the lender may opt to convert you to a fixed-rate loan that's more predictable and manageable.\n*   **Principal reduction**: In extremely rare instances, the lender may lower the principal portion of your loan, effectively handing you a chunk of equity in your house. If you're given that type of modification, consult your tax advisor, because the equity you receive may be considered taxable income.\n*   **Refinancing**: Strictly speaking, a mortgage refinance is not a modification because it generates a new loan agreement, rather than adjusting your existing one. It's seldom a viable alternative for modification candidates because qualifying for a new loan could be difficult. But lenders may occasionally suggest this course for borrowers who have significant assets they can use in a pinch to cover the loan (or that the lender can place a lien against in case of default on the new loan). END