Loan modification examples
*The following loan modification example is completely made up for learning purposes only
Bob and Linda live in a nice, upper middle class neighborhood with two young kids. They were doing okay financially, but the recent economic downturn has hit them pretty hard.
Bob went from making low 6 figures a year to making $40,000 a year as a freelance engineer due to the huge downturn in the real estate market. Linda, a former stay at home mom, now has a part time job, but money is still very tight.
They have two real options: Make a successful loan modification, or lose their home. They choose to be smart about their situation. They get in touch with their bank and tell them the situation and they talk to an attorney.
After a couple of weeks of negotiating, the bank decides to allow Bob and Linda to pay less to their mortgage for the forseeable future until they get back on their feet. Bob and Linda get to keep their house and the bank does not have to foreclose their home. Everyone wins.
This is just a made up example, but it does show you how well a loan modification can work out if it is done right.