WHAT IS A Loan Modification Specialist

Loan modification specialist is a term that refers to an employee at a lender who makes changes to existing loans.

BREAKING DOWN Loan Modification Specialist

A loan modification specialist is a loan or mortgage specialist who works specifically with loan modifications. Loan modification specialists help borrowers who are either close to defaulting or have already defaulted on their mortgage. If an individual is at risk or has a high probability of defaulting on their mortgage loan, they may benefit from a loan modification. A loan modification changes an already existing loan specifically to keep the borrower from defaulting on their loan, and to avoid the foreclosure process.

A loan modification specialist assists individuals in making adjustments to their current loan to avoid foreclosure. Loan modification specialists are a kind of liaison between the borrower and the lender, and may work with the borrower by reducing interest rates, extending the length of the loan term, changing the loan type, or a combination of all adjustments. The specialist can also help the homeowner assemble the necessary documents that prove the homeowner is in need of assistance in order to avoid defaulting on their loan.

When Loan Modifications Occur and Why

The popularity of loan modifications rose during the financial crisis of 2009. In the wake of the  financial housing crises, President Obama rolled out programs that provided incentives for lenders to adjust the loans for the borrower to avoid default and prevent foreclosures.

Though commonly associated with mortgages, loan modifications may occur with all types of loans. Lenders and borrowers often reach the loan modification with the help of loan modification specialists, through a settlement procedure. In order to enter into the procedure, the lender generally believes that a loan modification will provide substantial savings in comparison to a charge-off alternative.

The federal government offers several loan modification programs, through a variety of government sponsored websites. The qualifications and requirements vary program to program, but typically the programs base them on the amount the borrower owes, the property being used for collateral and specific features of the collateral property. Federal loan modification programs can be invaluable for a homeowner who faces foreclosure. The federal programs may enable the homeowner to keep their home, but they can be difficult to navigate. The complexity of these programs gave rise to the loan modification specialist.

How a Loan Modification Is Different From a Forbearance Agreement

A loan modification agreement is a long-term solution for borrowers that adjusts the terms of a loan from its original obligations into terms that are financially manageable for the borrower. A forbearance agreement, on the other hand, provides short-term relief for borrowers who have temporary financial problems.