Mortgage Loan Modification Vs. Refinance

June 4, 2010
6 min. read time

What is the difference? Which one is right for me?

Loan Modification, or more specifically, Mortgage Modification is a tool that you may be able to use to stay in your home rather than loose it to Foreclosure. It differs from a Refinance in that Modification programs are designed to modify the terms of your existing Mortgage. A Refinance replaces your existing mortgage with an entirely new one. Since 5% of all Adjustable Rate Mortgages are going to "Reset" in the next 10 months, you could be in real trouble if you have one of those ARM loans. Ideally, you want to refinance into a low, Fixed Rate Mortgage before your current mortgage resets and before Rates on Fixed Mortgage Loans start to rise!

The Obama Administration has put forth a government mandate to Lenders called the "Federal Home Affordable Modification Program" or HAMP. Many lenders have their own guidelines under which they would agree to a Modification of your existing Mortgage but the Obama program, HAMP has specific guidelines under which a Lender must allow a Mortgage Modification if you meet the criteria. The Obama Making Home Affordable Program may be available if your loan is owned by Fannie Mae or Freddie Mac. If not, check with your Lender or Loan Servicer to find out what Mortgage Modification programs they might have available.

You can apply to your Lender on your own for a Modification of your Mortgage but, the process can be quite daunting. Just here locally, in Las Vegas, many Loan Modification companies or consultants have popped up in the past two years. While many have been reputable, many have been taking advantage of desperate homeowners by charging high fees in advance and then not providing the service. Some have even collected as many fees as they could and then just disappeared after stringing along as many people as possible while they collect fees from as many "clients" as they can. For this reason, the State of Nevada and many other states have enacted laws requiring any person or company engaging in Loan Modification services, to be licensed and regulated just as Mortgage Brokers and Lenders are currently.

At the end of this post, you will find important links to resources that you can and should use to educate yourself on the Loan Modification Programs that are available to you. It is important to be very well informed and know your rights before you contact one of these Mortgage Modification companies. First and foremost, check to see if your State requires Licensing for Loan Modification Companies or Consultants. Then make sure that the company you choose is licensed!

So which one should I choose?

That depends on your current situation. Generally, if you are current on your mortgage and not owing more than your home is valued at, i.e. "upside down", you should look at Refinancing first. Even if you have had a few late payments in the past two years, you may qualify so don’t tell yourself that you can’t before consulting with our Mortgage Professionals here at Valley West Mortgage. If you are not sure that you are “upside down” or have too many late payments, not enough income or a long enough employment history, etc., we will help you to determine your exact situation so that you can make an informed choice.

Here at Valley West Mortgage, we do not provide Loan Modification services. We don’t charge any fees in advance so it will cost nothing to talk to us and find out which choice makes sense for you. We can provide you with a true picture of your situation so that you will be comfortable in the knowledge that either, you can qualify to refinance and would gain a significant savings in your Monthly Payment by doing so or, you will know that you should seek a competent and trustworthy Loan Modification Specialist who is properly licensed (if required in your State). You may also choose from many non-profit homeowner counseling services in your area. Please check with your States regulatory agency for Mortgages or Real Estate and with your local Better Business Bureau before you sign a contract or pay a fee to any Loan Modification Consultant or Company!

To find out more about how Loan Modification Programs work you can go to:

Making Home Affordable: Set up specifically for educating consumers about the HAMP program enacted by the Obama Administration: Making Home Affordable

Check to see if your loan is owned by Fannie Mae: Fannie Mae Loan Look Up

Check to see if your loan is owned by Freddie Mac: Freddie Mac Loan Look Up

The Federal government also provides free resources: Call the Homeowner's "HOPE™ Hotline at 1-888-995-HOPE (4673) for information about the Making Home Affordable Program and to speak with a HUD approved housing counselor. Assistance is available in English and Spanish, and other languages by appointment. is a free website: To find a local counselor in your region:

Lastly, if you are in the State of Nevada, here is a link to check the license status of Mortgage Brokers, Lenders, Modification Companies and Individuals: Nevada Mortgage Lending Division Licensee Data . Most States are now required to have all of their licensed Mortgage Professionals registered through a recently created National Database called the "National Mortgage Licensing System" or NMLS for short.

While the State of Nevada will be one of the last States to join the NMLS System in October of 2010, your State probably already has. Here is a link to the NMLS Consumer Search for Licensees . In their search box, you can enter a Company name or an Individual (first then last name) and any location information. Once the result is displayed, you will be able to filter the results if you got too many John Smiths for example. Then check on the status of the Professional that you are thinking of working with once you are looking at the correct record.

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