Home Mortgage Help
Loan Modification Process
A loan modification is a change to the loan terms that is agreed to by and between the lender and the homeowner. The lender will modify the existing loan in order to work with the homeowner because of a hardship. The purpose is to help make the loan more affordable. Usually loan modifications are in the form of a rate reduction and/or fixing the rate for a certain period of time and/or even lowering your principal balance in extreme cases. Loan modifications are for borrowers that are delinquent or struggling to make their mortgage payments and suffered a hardship such as a job loss, divorce, or illness. Borrowers can even obtain modifications from their lender to convert to a fixed rate loan from an adjustable rate mortgage.
The earlier the homeowner addresses the issue, the better the chances are of negotiating a lower fixed rate and a payment that is manageable. If the household can afford the home, but not their current mortgage, then they may be eligible for a loan modification. A key factor that is required in every loan modification submission is the existence of some type of a hardship. The hardship can be temporary in nature or permanent, but the borrower must be able to prove the hardship.
The following are a sample of hardships that may get a loan modification request approved:
- Adjustable rate mortgage has re-set (causing an increase in the monthly payments)
- Illness to yourself or family member
- Loss or reduction of income
- Loss of job, changing of jobs
- Damage to the property
- Unable to sell the property
- Failed business
- Job relocation
- Death of a spouse or a family member
- Divorce or separation
STEP 1 – CONSULTATION
Consult with a professional to see if loan modification is your best option.
STEP 2 – GATHER FINANCIAL DOCUMENTS
You will probably need the following documents:
- Hardship Letter
- Most Recent Mortgage Statement
- Last 4 Bank Statements
- W2 Forms (Last 2 years)
- Tax Returns (Last 2 years)
- Income and Expense Financial Statement
STEP 3 – NEGOTIATIONS
Submit your financial packet to your bank to start negotiations.
STEP 4 – APPROVAL
If your modification request is approved, all final modification documents (a new agreement) will be sent to you to get your approval. Remember, this will not happen overnight, however, in most cases it takes at least 60 days to complete the process.
A short sale occurs when the proceeds of a debtor’s real estate sale fall short of the balance owed on the property’s mortgage. Usually this happens when the debtor can no longer pay the mortgage loan on the property and the creditor decides to sell the property at a moderate loss, rather than pressing the debtor and risking bankruptcy or foreclosure. An advantage to the short sale process is that it is typically faster than a foreclosure and avoids the steep bank loans. The debtor usually remains obligated to pay the deficiency, or the remaining balance of the loan, unless settlement is clearly stated on the acceptance of offer.
Because short sales are a form of debt settlement, they have a negative impact on a debtor’s credit report. Like all other entries except bankruptcy, short sales can remain on a credit report for the duration of seven years. It is possible to obtain another mortgage within one to three years after a short sale, depending on the debtor’s other credit information.
Loan Modification or Loss Mitigation: Is It Right For You?
Life can be unpredictable at times, with new expenses rising up out of nowhere. Whether a life event or major change occurs or you lose your job, many things in life can cause you to fall behind on your mortgage payments. That being said, just because you’re having trouble now doesn’t mean you have to lose everything. You maybe be able to qualify for a Making Home Affordable Loan modification that could help you without putting your home at risk.
What is Loss Mitigation?
Loss mitigation is a process that often goes along with loan modification. It is used in an attempt to lessen the amount of damage typically caused when you default on your mortgage. Essentially, new terms are agreed upon by both the lender and the borrower that ensures the lender receives their money back and the borrower can make their monthly payments.
What is Loan Modification?
A Loan Modification, otherwise known as mortgage modification, mortgage loan modification, or home loan modification is the process of modifying your existing loan to make your payments more affordable. The purpose of a loan modification is to provide you with a mortgage payment you can afford. It’s actually very similar to a mortgage refinance but instead of finding a new mortgage that you can afford, this just modifies your current mortgage into something you can fit into your budget.
Why Loan Modification?
Loan modification may be very helpful to those in times of great financial distress. It can offer numerous benefits and can get you out of debt. Some of the primary reasons for a loan modification are to lower your monthly payments and/or interest rate and to reduce your loan balance.
Why Consider A Loan Modification Attorney?
Lenders are difficult for two main reasons: First, you get different answers from the different customer service representatives each time you contact your lender. Second, customer service representatives are not equipped with the necessary tools to be able to assist you.
A Loan Modification Attorney will review your case from a legal perspective. The Attorney will know how to deal with your lender, and will help you prepare your application so it’s processed quickly. When the Attorney presents your case, he will be armed with all the necessary documents & the correct negotiation techniques because an Attorney uses legal information as leverage when negotiating.
The attorneys sponsoring this site do not offer loan modification services, but an ordinary google search will likely turn up some results. Please know that some states have extra licensing requirements for loan modification providers, including attorneys, so be sure to thoroughly research the issue.
Who Can Use A Home Loan Modification?
It depends on what your current situation is and who your lender is. While most lenders follow the same standards and have the same rules when it comes to loan modification, some do vary. They can easily let you know if you qualify for loan modification. Typically, however, the most common standards include having missed a payment, having experienced a recent financial hardship or change, owning a property and not having filed for bankruptcy. Other factors may come into play, but these are the basic rules you’ll need to follow.