What is a Trial Loan Modification?

By: Timothy McFarlin | Published: May 29th, 2010 | Category: Loan Modification

A trial loan modification is a temporary modification to a person’s mortgage that lowers their monthly payments for up to a few months while the lender evaluates the borrowers request for a permanent loan modification.  Trial loan modifications are also used by lenders to determine whether or not a borrower is responsible enough to adjust to their modification wisely.

Many people manage to dig themselves back into debt after a modification because they treat their decreased monthly payment like a check from their lender, and splurge on unnecessary luxuries like new cars or fancy electronics.  Therefore, if a person is going to fall into this type of trap during a temporary modification, they are more than likely going to fall into the trap once the permanent modification is approved.  People who are willing to take on more debt after a modification pose a greater risk to the lenders because more debt means more bills to pay, and more bills to pay means a greater chance of defaulting on one or more of those bills. 

Not every lender issues temporary loan modifications to their borrowers.  Each lender that does issue temporary loan modifications will have different rules on how the program will be administered and who will be eligible for such a modification.  In some cases, a lender may not even offer a temporary loan modification unless specifically asked.

Many borrowers might scoff at the idea of a temporary loan modification, seeing it as the equivalent of a child hearing the word “maybe”, which usually means “no”.  There are plenty of horror stories on the web about individuals who have been approved for temporary loan modifications only to be denied for a permanent one.  Be that as it may, no borrower should ever turn up their nose to a lower monthly payment, even if it is just temporary.

Being approved for a temporary loan modification does not mean that the borrower has to stop fighting or negotiating for a permanent modification.  A person who has been approved for temporary modification can still be represented by an attorney and can still have their attorney fight tooth and nail for the lowest monthly payment possible.  In fact, it is highly recommended that borrowers who have been approved for a temporary loan modification continue their efforts for a lower monthly payment, since letting one’s guard down too soon can take enough pressure off of the lender to make denying a request to modify all the easier.

As soon as a borrower finds out that they have been approved for a temporary loan modification, they should begin putting as much money away into some kind of savings account as possible.  Since a permanent modification is never guaranteed after a temporary modification, the borrower must realize that their mortgage payments could possibly increase after the terms of a temporary loan modification expire.         

Post Tags:

Share This Page


Ask Our Lawyers a Question







Use of this form for communication with our office does not establish an attorney-client relationship, confidential information should not be sent through this form.