My mortgage company gave me a Loan Modification Offer, what can I do and how does it really work?

Any advice here would be much appreciated!

I am currently going on the third month of not paying my mortgage payment. My husband and I seperated…I still work full time…I just do not make enough money. I tried so hard to work with my mortgage company months ago, they could have cared less. SO…I figured instead of always being behind and worrying if my heat would get turned off… I did not make the last two months of payments. I paid my overdue utilities instead. (Please do not comment with critisism or judge me…I am a single mom and have no debt other than my home.) I have the option of moving back home with my parents and starting over…and let the house go. While foreclosure is taking place I have about a year to save all my money and move. Honestly, I do not want to let it go and lose what credit I have left, but at this point I cannot afford not to. (house is not worth what I owe on it…I can not even sell)

Okay so sorry that part took a minute to tell. Now my situation is this: I got today in the mail an offer from my mortgage company to modify my loan. (now they want to help me?) They propose to lower my monthly payment substantially by lowering my current interest rate (8% fixed now) to 3% for the first year. After that it will go up yearly no more than 1% until it is capped at 5.125%. Sounds good right???Except the life of my loan is now 40 years instead of the 24 I have left now. If this was it, I would not think so bad of the deal, but the other part is (if Iam reading this correctly?…Iam no loan officer) The maturity date of the loan will not change…meaning I will then owe a HUGE payment(what they call a ballon payment). This is due when the original date would have been for my loan to originally be paid off. It is over 40,000. So I think what they are saying is they will modify my loan and it will include affordable payments and lower interest rate. But, because it will not be enough to pay off the loan at that time, I will then need to make that last big payment to pay off the loan. I hope I understand that right? My question is could I sell the house before that time and pay it off that way? What if I do not…then I have defaulted on the loan when I can’t come up with the ballon payment? And how does this add up to being a 40 year mortgage if the payoff is due before 40yrs? Is this my only option in “loan modification”?

Sorry it was long, thank you for reading and any help would be much appreciated! If you are a loan officer/realator/work for mortgage companies and need more info than I am giving here please e-mail me at julieannesmall@yahoo.com… Thanks Again!!!!!!!!!

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