The term "loan modification" denotes a lending industry provision that allows mortgage lenders to accept applications for revisions to existing home loans from borrowers. These days, it is considered a last minute effort to avoid foreclosure on a property and at the same time allowing the borrower to continue living in the home and also resuming ownership of it, seeking to rework some of the loan's terms to make the overall loan one that the borrower can live with.
There are times, however, when a loan mod is not the answer for a borrower and he might need to consider a short sale or other methods of dealing with the difficulty experienced in making mortgage payments. For example, if the homeowner is not yet in pre-foreclosure status, behind on at least two consecutive mortgage payments, lenders do not consider them good candidates. Instead, they are required to work with the lender - or other lenders - to find refinancing for their existing loans.
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Moreover, if your inability to meet your monthly mortgage obligation is based on your choosing the wrong mortgage product at the onset, having failed to adequately disclose your earnings or lack thereof, or simply cannot show any event that is the immediate cause for your problems keeping up with the mortgage, you may not be a good candidate and the lender may not be sympathetic to your cause. Loan modifications are for consumers who can afford the home, but due to events beyond their control can no longer afford the payment at the present time.
A mod is also not a recognized form of loan preservation if you are not currently employed. Banks and independent lenders recognize that modification gives a chance to a homeowner who has a good probability of continuing regularly scheduled monthly payments, reimbursing the bank not only for the missed interest and principal, but also for the fees and late charges that have been accrued as the loan headed toward foreclosure. Someone currently unemployed or without a verifiable income is not a good credit risk and the bank will consider severing ties sooner rather than later in their best interest.
Finally, a homeowner who is seeking a loan modification for a secondary home, investment property, or vacation residence most likely will not get the go ahead from the banks. Mortgage lenders are willing to work with homeowners who are seeking to save their primary residence from foreclosure, not those who are attempting to preserve a secondary asset or money making opportunity.
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