If you live in areas such as south Florida and you bought a house within the last 5 years, then you are probably having equity issues, such as no equity or worst negative equity, which mean you are upside down and now owe more to you lender than your house is worth. Or if you are being denied for a refinance loan for other reason such as low credit scores, late mortgage payments or even foreclosure, then a loan modification could be answer you been waiting for.

Third, lenders now requires borrowers to have reserves. In this economy how many people really have reserves? The likelihood of these people having reserves when the economy was at it's best is probably slim. Finally, let's not forget about the distressed area's which is nationwide. To this day maybe 99.9% lender will not do a 100 percent financing (who can blame them?). Now, with all this in mind, what options are these homeowners left with?

The answer? Loan modification can be beneficial for homeowners when refinancing is no longer an option. With foreclosure filings increasing up over 80 percent higher than 2007, it has forced lenders to cooperate with assisting homeowners by modifying non performing mortgage loans. Lender are willing to work with homeowners a long as they feel that the loan can perform. Though, in some cases homeowner are denied for the simple reason that no matter what modification the lender has to offer; the borrower just cannot afford the home.

All that having been said, even with relatively decent credit and a sizable amount of equity in your home, lenders are often reluctant to grant refinance loans to people in foreclosure because they've already shown themselves to be default risks. Because of this, even if you are able to refinance to stop foreclosure instead of a loan mod, the terms of the refinance might be so undesirable that the modification of your loan still might be your better choice.

When foreclosures are prevented then families get to keep their homes, the surrounding neighborhood maintains the value and the lender maintains a profit. It is important for home owners to understand that loan modifications are on a case by case basis, on the individual level as well as the lender level, each lender have their own guidelines for loan modifications and with saying that, no one or company can guarantee any results. If you choose to hire a loan modification company to handle you modification and they make these types of guarantees, then don't do business with them, as the lender has the final say. Don't get me wrong, but while I want home owners to be aware of unscrupulous loss mitigation companies that are looking to take advantage of people, there are also reputable companies that can present the home owners case the right way to the lender that maximize their chances of getting the modification approved. The lender only gives the homeowner one chance within any 12 month period whether it's favorable or unfavorable, so choosing a legitimate loan modification company can be beneficial.

Learn more about Obama Mortgage Relief Plan Qualifications.