Because rules vary by lender, find out when the appeal deadline is. There are many reasons why you might not qualify, from not providing sufficient proof of hardship to having a high debt-to-income ratio DTI. Working with a housing counselor or attorney who specializes in mortgage modifications can improve your chances of getting approved for a loan modification.
If the modification is federally backed i. Otherwise, some loan modifications might be reported as settlements or judgments, which could result in a ding to your credit. Be sure to talk to your lender about if their policy is to report modifications.
However, a loan modification is not as damaging as a foreclosure. Natalie Campisi is a Los Angeles-based reporter who covers mortgages and housing news for Forbes Advisor. Previously, she was the senior mortgage reporter and analyst for Bankrate. Select Region. United States. United Kingdom. Natalie Campisi. Forbes Advisor Staff. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.
Getty Images. What Is a Mortgage Modification? Who Qualifies for a Loan Modification? How to Modify Your Home Loan There are several ways your mortgage lender can modify your home loan, from reducing your interest rate to making your mortgage longer in order to lower your monthly payments. Reduce the Interest Rate Shaving your interest rate can reduce your monthly mortgage payments by hundreds of dollars.
Lengthen the Term Extending the length of your loan is another strategy lenders use to make the monthly payments more affordable. Switch from an Adjustable-Rate-Mortgage to a Fixed-Rate Mortgage Switching from an adjustable-rate mortgage ARM to a fixed-rate mortgage might not lower your existing payments, but it could help protect you from rising interest rates down the road.
Roll Late Fees Into the Principal If you have accrued past-due charges on things like interest, late fees or escrow, some lenders will add that to your principal balance and reamortize the loan.
Reduce the Principal Balance In rare circumstances, lenders will actually lower the amount you owe, also known as a principal modification. All or Some of the Above Some borrowers might need a combination of actions in order to make the monthly mortgage bill manageable. Was this article helpful? Share your feedback.
Send feedback to the editorial team. Rate this Article. Thank You for your feedback! Something went wrong. These companies might tell you they're experts at negotiating a modification, but there's really no trick to it. Little to no haggling happens in the loan modification process; the investor has specific requirements that borrowers must meet to get a modification, and if you meet them, you'll get one. In some circumstances, it's worthwhile to get an attorney to help you in the modification process like if you're having difficulty understanding what you need to do to complete your application, the servicer violates loss mitigation laws, or your servicer isn't responding to you.
Rather than hiring a loan modification company, consider talking to an attorney. If you can't afford a lawyer, a legal aid organization or HUD-approved housing counselor might be able to help you for free.
The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state.
Grow Your Legal Practice. Meet the Editors. How to Get a Mortgage Loan Modification. If you're struggling to pay your mortgage, you might be able to lower your payments with a loan modification. Various loss mitigation options include: loan modifications forbearance agreements repayment plans short sales , and deeds in lieu of foreclosure. Perhaps the most sought-after form of loss mitigation is a modification. What Is a Mortgage Loan Modification? Mortgage Loan Modification Requirements To be eligible for a mortgage modification, along with meeting other investor-specific guidelines, you'll generally need to show that: the home is your primary residence you've gone through a financial hardship like you had to take a lower-paying job or you went through a divorce and experienced a loss of household income, and that you have enough steady income to make regular payments under a modification.
Mortgage Modification Programs and Options Depending on your mortgage type and circumstances, you might qualify for a government modification program. How to Apply for a Loan Modification To apply for a modification, contact your servicer's loss mitigation department, sometimes called a "home retention" department, and ask for a loss mitigation application.
You'll need to submit the application to your servicer and likely include: a completed questionnaire that includes your personal information, mortgage information, property information, and so forth recent pay stubs or a profit and loss statement if self-employed bank statements tax returns an income and expense financial worksheet, and a hardship statement or affidavit.
Don't Hire a Loan Modification Company to Help You While it's sometimes useful to hire an attorney to help you in the modification process, you should avoid loan modification companies in almost all circumstances. You'll Save Money, Probably Lots Loan modification companies charge a lot for services you can perform yourself. Efficiency in Responding to Servicer Inquiries and Working Through the Process If you handle the modification application process yourself, you can respond to any inquiries or requests from the servicer promptly.
Loan Modification Scams Abound The vast majority of modification companies are scammers. Be sure to include every page of each required item. When you send your paperwork to the servicer, don't omit any pages. For example, even if page three of your bank statement is blank, if the other pages say "Page 1 of 3" and "Page 2 of 3", you need to send all three pages. Otherwise, the servicer will probably consider the document incomplete.
Keep all correspondence you receive from the servicer. Be sure to retain all written communications you receive from the servicer, such as a confirmation letter that the servicer received your complete application or a letter telling you that certain items are missing.
This information could be useful later on if you want to challenge a foreclosure by showing the servicer didn't comply with servicing laws. To learn what to do, and what not to do, in a foreclosure, see Foreclosure Do's and Don'ts. Learn about laws that protect you in the process. Servicers sometimes make mistakes when processing borrowers' modification applications. Find out about the federal and state laws that protect you in the loss mitigation process so you can enforce your rights if the servicer fails to abide by the law.
Don't: Send illegible documents. When you send your paperwork to the servicer, be sure that all pages are legible. Otherwise, the servicer might deem them unacceptable and deny your application. Be aware that what you consider acceptable and what the servicer considers readable might be different. The servicer won't put in a lot of effort to decipher words or numbers that are potentially unclear.
It's in your best interest to make it easy for the servicer to read the documents by submitting only clear, clean copies. Lose your cool if the process isn't perfectly smooth.
Stay calm, even if you have to resubmit paperwork you already sent in. Resend whatever item the servicer asks for, and send it as soon as possible.
If you get irritated with the servicer and insist that you already submitted all required documents rather than resending them, you'll only hurt yourself.
Remember that your servicer is likely getting thousands of requests for modifications—don't give the staff an easy reason to turn down your request. Be afraid to get clarification. Be sure that you're clear on exactly what items you need to send in.
The servicer might request two pay stubs assuming that covers one month of your income. But if you're paid weekly, bimonthly, or monthly, you might have to send in more or fewer pay stubs. If you need clarification, ask your point of contact. Under federal law, in most cases, b y the time you're 45 days' delinquent, the servicer has to assign a single person or a team to help you with the loss mitigation process.
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