Trial Period

• If the loan modification falls under the federal government's Home Affordable Modification Program, there is a trial period set up for the borrower. The trial period is for three months, and it is designed to make sure that the person applying for a loan modification can actually pay the lower rates. Loan modifications are time-consuming and require a lot of paperwork. Before the lender goes through the whole process, it wants to make sure that the new mortgage is viable. While the trial period is going on, the lender processes the necessary paperwork. If, at the end of the trial, the borrower shows that he can make the payments, the loan is finalized.
  
  

Fees

• With companies out to take advantage of homeowners in desperate straits, some companies that claimed to handle loan modifications insisted on upfront payment fees. These fees ranged from a few hundred dollars to thousands of dollars. Often, the companies did not perform the services advertised, and the Federal Trade Commission put a policy into effect that prohibited loan modification companies from charging upfront fees. In addition, under the Home Affordable Modification Program, late fees and penalties on properties that are undergoing loan modifications are set aside in order to get the borrower back on track.
  
  

Inspections

• The mortgage lender is allowed to physically inspect the property that a loan modification is being sought on. This is to make sure that the property is in good condition. If the house is not livable, the homeowner might have little incentive on staying in the home. In addition, by inspecting the house, the lender can determine whether there will be any value to reselling the house in the event that the trial period does not work out.
  
  

Foreclosure

• During the loan modification process, most lenders will put any plans to foreclose on hold, pending the outcome of the trial period. It should be noted, however, that it is up to the lender, as to whether foreclosure proceedings will continue during the trial period.