How does a mortgage loan modification work ?

Well that all depends on what direction you would like go. You really have two routes.

1) Go directly to your lender and present to them your case and hopefully they will provide you some guidance on what they will require in order you to modify the current terms of your mortgage loan.

2) Hire legal counsel to help to assist you in negotiating with you lender.

If you are going down either path you should gather information about both choices and weigh in on the options and make an informative decision. I've reviewed the options and have come to my own conclusioins. Below are the pros and cons for both options and the summary of the option that I would take.

Advantages -

1) The biggest advantage for taking on a lender on your own is that you will save yourself some money.
2) You and you will be keep pushing your lender.
3) Free help is readily available from several government organization or government sponsored organizations including ACORN and HUD.

Disadvantage -

1) Let's be honest . The lender is not going to be on your side and given the situation you may be in they are going to play by their rules and negotiate the terms to their own benifit.
2) The lender will most likely require you to spend your valuable time and provide all the necessary documentation and paperwork to evaluate if they will even approve your loan modification. My experience tells me that you will not be in the strongest posistion to negotiate fair terms.
3) Who do you talk to ? Getting to the right person or department may be as challenging as negotiating your terms. Have you ever been sent form one department to another a "big" company ? May not be all cases but find the right person to talk could be challlenging.
4) Not having a full understanding of your rights under the law could be a serious disavantage for you. A lender could take advantage of your lack of knowledge and leave you not much better of than you were.

There are also many sites that are selling or providing free loan modification help material. The ones that are selling you the material could provide you the guidance to help your through the negotiation process with your lender. Bottom line ? You will have to do the work yourself and will not be as easy as one may think.

Advantages -

1) All Loan Modification Services will have a legal team that will negotiate with your lender on your behalf. Their goal is get a fair deal for both sides.
2) Having a legal team on your side will give your the negotiating power that you need. You can be assured that they will be aggressively working to lower your interest , monthly payment and possibly your principal amount.
3) A mortgage loan modification service provider has potentiallly worked many cases for others just like you with many lenders. They know who to talk to and with an established relationship they migth be able to accelerate the process and having you on your way to getting your financial situation back on track.
4) Having legal counsel could potentially put an immediate stop to foreclosure even if it is already process. Understanding the law will make the difference.
5) If you foreclosure is in process you find it difficult to stop a foreclosure.
6) If you make through the process of approval of your mortgage loan negotiation you will have documents that need to be executed. You will most likely need legal counsel to review.

Disadvantage -

1) The primary disadvanted is the the cost of the service The fee will be dependant on the your situations. Fees will typicall start at $2000.00. They fees are basically to cover legal counsel and negotiating your new mortgage terms.

A loan modification is probably the best option you have to reduce your interest and monthly payments and to stop foreclosure. i personally believe that the fees associated with hiring Loan Modification service provider is money well spent and the best choice to make sure that you are getting a fair deal. This is based on the fact of the time and effort that it would take to negotiate with your lender on your on and the fact that someone will be working within your best interest and help you keep my home.