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Everyone in America has heard of problems within the current housing market. Millions of people have been directly burdened by it. Those trying to sell their home understand the slow pace at which the housing market is moving. In addition, millions more are suffering with economic woes which are preventing them from paying their mortgage payment and nonetheless corrupting the market more. As an attempt to avoid millions of foreclosures and a complete mortgage market meltdown, experts are now offering homeowners the option to modify their current loan.

A mortgage loan modification is the restructuring of a home mortgage loan. The purpose of the restructuring is to make the loan more affordable and able to fit into the homeowner’s budget. Thus, the homeowners can avoid foreclosure and get back on track with their mortgage payments. There are many different types of modifications available today. However, most of the varieties include a reduced mortgage interest rate for a specific amount of time.

Mortgage loan modifications are often used when:

• The original terms of the mortgage loan are preventing homeowners to make timely payments and the loss of residence is a real risk.

• Debt consolidation, refinancing or forbearances aren’t logical in a situation. The modification is a long term solution when interest rates of hardships are overwhelming to a homeowner.

•The homeowner and lender want to stop foreclosure and instead reinstate the loan.

Lenders are often in favor of working with borrowers toward loan modifications. Some of the reasons lenders are cooperative are because:

• In modifications, most of the outstanding principal, interest, past due escrow, late fees and additional costs are rolled over and won’t be lost revenue to the lender over time.

• Since modified mortgage loans often used a step rate or extended term approach, they have lower payments. Thus, the borrower is more capable of making the timely payments and the added time actually allows the lender to earned more interest.

• With the housing market being very slow, lenders are not excited when they must foreclose on a property because of the difficulty in unloaded it after foreclosure. Thus, they are excited to modify in lieu of foreclosure.

• Lenders are able to show less defaulting loans in their portfolio when they choose modification over foreclosure. This is a good thing for lenders trying to gain potential investors.

Those who are interested in home loan modification must meet the following requirements, in most cases:

• The homeowner's loan payment must be affected by a reduction in income.

• The homeowner must be currently employed or have a stable and predictable monthly income.

• The home must be the primary residence for the applicant.

While a mortgage loan modification seems like an attractive option for many lenders and homeowners at risk, the real question is whether it will be enough to avoid a complete mortgage meltdown. Experts think these new modification programs will indeed help troubled borrowers get their mortgages up-to-date and under control. However, they fear the programs won’t be enough to restart the housing market altogether.

The problem is that 60% of delinquent mortgages are held by private investors with mortgage-backed securities. Thus, the mortgage “big players” like Fannie Mae, Freddie Mac, JPMorgan Chase, Citigroup and Bank of America are all willing to modify, but hold much less of the delinquent mortgages. Therefore, their power is limited at this point.

Of course, the modifications will help to reduce interest rates and allow owners to extend their mortgages in some cases, which will help the market. However, experts are hoping if enough mortgages are modified quickly, the market will be saved from a complete crash.