This is an option that can be considered when you have been rejected or do not qualify for refinancing. If your life circumstances have changed and you are expecting some hardships in the future where you will not be able to pay the mortgage or you are already defaulting on your payments, there are loan modification firms that specialize to help you in such a situation.
How it works
You approach the lender and negotiate with him to modify the mortgage agreement so that the payments become affordable for you. This is a better option than approaching other lending institutions because your current lender is already aware what your financial situation is and your credit score will not be important for him. A loan modification service can help you renegotiate some of the terms to adjust them so that repayments become more affordable for you.
They will negotiate along the lines of reducing the interest rate and keeping it fixed for a certain period of time so that you can afford the current repayments and hopefully later you will be able to pay more once your financial situation gets better.
There are other ways of saving costs by writing off the penalties that have been levied and the lender might also be able to write off some of the principle amounts. The loan repayment period could be extended to reduce the monthly amounts.
Finally, a loan modification is a good way to save your home with the added advantage that at a later stage, you can sell your home for a profit once there is a boom in the housing market.