Some loan mods better than others

Why interest rate is more likely than loan balance to be reduced
Published on Jan 6, 2009

"Do borrowers have any say over the type of loan modification they get? What kind of modification should they look for?" Mortgage modifications are changes in the terms of a mortgage loan designed to make it more affordable to the borrower. Generally, modifications are available only to borrowers in default or in imminent danger of default. The purpose is to cure or avoid the default, thereby avoiding foreclosure. In general, borrowers must take the modification they are offered, as they have very little bargaining power. Their only card -- the implicit threat that if they don't receive an adequate modification, they will default -- is one they can't play, at least not explicitly. However, borrowers can indicate what they can afford to pay, without it being perceived as a threat. The major types of modification are discussed below in order of their cost to the investor and their value to the borrower. Capitalization of arrears: The past-due payments and perhaps ...