Modification of a Note Secured by a Deed of Trust

A modification can save your house.

A modification can save your house.

If you're having trouble paying your home loan, you might be able to work something out with your lender. If it thinks that it will cost too much money to foreclose on you, it might be willing to modify the terms of your loan. A loan modification could take your mortgage out of default and lower your monthly payment to make it affordable.

Elements of Home Loan

While most people call their home loan a mortgage, there's a decent chance that they don't even have a mortgage. Home loans are made up of two pieces. The promissory note is the actual loan agreement that spells out your agreement to pay back the loan. The security agreement -- which is either a mortgage or a deed of trust, depending on your state's laws and customs -- gives your bank the right to take your home if you break the promises you made in the note by, among other things, not paying back the loan.

Getting Modification

If you're in trouble with your loan, you might be able to get a modification. Modifications come in many different types. If you just fall behind, the lender could add your payments to the end of your loan, but if you are in serious trouble, it could do that, lower your interest rate, extend your loan and lower your balance. The key to the lender is that doing the modification has to make good business sense relative to the other option of foreclosing on the loan.

Benefits of Modification

Modifications have two benefits. First, they can solve your problem with your loan and get you out of trouble with an easier-to-afford payment. Second, they let you stay in your home without having to go through a foreclosure. A modification could even be a better deal than refinancing because you could end up with a modified loan that has better terms than what you could get in the marketplace.

Alternatives to Modification

If you can't get a modification, you might have other options. Your lender might offer a repayment plan that just lets you catch up on missed payments. Another option could be to refinance to a new loan with a lower payment, if one is available and if you can qualify. Borrowing money from somewhere else or taking on a second job to make your payment could be another option. If none of these will work for you, you may need to look into leaving your home and finding a more affordable place to live.


About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

Photo Credits

  • Jupiterimages/Goodshoot/Getty Images