A Loan Modification may be the best alternative if you are not able to keep up with your mortgage payment. You can certainly attempt a loan modification on your own. However, keep in mind that the bank’s goal is to protect their interest, which may not be the homeowner’s best interest. In addition, bank negotiations may prove to be frustrating and time-consuming if you are not familiar with the bank’s system.
You can also negotiate your Loan Modification with the assistance of an attorney. In this case, it is important to look for a professional firm that have experience negotiating loan modifications and that is familiar with your lender’s policies.
Facts about Loan Modifications:
- Statistics show that more than 50% of loans modified in 2008 by the nation’s 14 largest banks were delinquent again after six months, putting those homeowners at risk of Foreclosure again. See article.
- As a result, of numerous unethical business practices, involving fraudulent fees, the California Department of Real Estate has started to crack down on many companies charging fees for loan modifications. See the following article.
Please review the following information carefully, prior to making a decision. Our information about Loan Modifications, Short Sales, Credit, and Distress Homeowner’s options is purely informative and is not intended as legal or tax advice. Please consult an attorney or a tax professional if you have specific questions about your particular scenario.
Frequently Asked Questions about Loan Modifications
01. What is a Loan Modification?
02. Do I qualify for a Loan Modification?
03. What can I expect from a Loan Modification?
04. How do I get started on my Loan Modification if I want to do it myself?
05. How long will a modification take?
06. Will Obama’s 2009 MHA (Making Home Affordable) plan benefit me?
1. What is a Loan Modification?
A loan modification is a permanent change to the original terms of your loan, producing a more affordable payment. In a modification, a lower payment may be achieved by lowering your interest rate, extending the term of your loan and/or reducing your principal loan balance.Back to Top
2. Do I qualify for a Loan Modification?
A Modification is not automatic; you must meet specific requirements from your lender to qualify. Your lender will require that you document extensive financial information, proving that you are not able to make your current payments. However, the lender will also want to make sure that you do earn sufficient income to make your new modified payments.Back to Top
3. What can I expect from a Loan Modification?
A Loan Modification can result in any or a combination of the following:
- Lower monthly payments
- Lower interest rate
- Adjustable (ARM) loan to a fixed rate
- Extend the term of your loan
- Bring your late payments current
- Waive late fees and penalties
- Reduce your loan balance
- Stop a Foreclosure
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4. How do I request a Loan Modification if I want to do it myself?
We urge you to contact your lender as soon as you decide to pursue a Loan Modification as it can be a lengthy process. Your mortgage statement should contain a customer service telephone number that you can call. Customer service will transfer you to the Loan Modification Department.
Once in contact with the Modification department, they’ll be able to provide you with the specific set of financial documents they require from you in order to make a decision on your case.
For certain lenders, a verbal confirmation of your financial situation may suffice to enable them to make a decision on your modification. Most lenders however will provide you with a list of the necessary information needed to document your finances. Following is the list of most commonly requested documents:
- Personal Hardship Letter (describing why you are unable to make your current mortgage payment)
- Financial Statement Worksheet (provided by your lender or by us)
- Last 2 years of federal tax returns
- Last 2 years of W-2 forms
- Last 2 months of Payroll Stubs
- Profit and Loss Report (if self-employed)
- Last 2 months of Bank Statements
Once your lender has received your request, you should follow up with them on a weekly basis to confirm status. Make sure to take notes on the information that you’re given with each call. Always be sure to get the representatives name and extension that you speak with. Lenders are overwhelmed by such requests, so their response time is slow. Be patient. Don’t get discouraged as it may take several months for a response from your lender.Back to Top
5. How long will a modification take?
Regardless of whether you attempt a loan modification on your own or with the assistance of an attorney, anticipate 2 to 5 months for a response on your request. Lenders are overwhelmed with requests and their response time can be lengthy.Back to Top
6. Will Obama’s 2009 MHA (Making Home Affordable) plan benefit me?
President Obama’s strategy to get the economy and the housing market back on track is the 2009 MHA (Making Home Affordable) plan. This plan went into effect March 4, 2009 and promises to refinance up to 5 million families unable to take advantage of lower interest rates because of falling home values. There are two parts to the MHA plan, the Home Affordable Modification and the Home Affordable Refinance.
Home Affordable Modification – is available to most conventional loans including prime, subprime, adjustable, loans owned by lenders and loans in securities. Lenders and servicers are not required to participate, it is voluntary. To be eligible for a Home Affordable Modification, a borrower must:Be owner-occupant in a 1-4 unit property
- Be owner-occupant in a 1-4 unit property
- Have an unpaid principal balance equal or less than $729.750 for 1 unit
- Have an unpaid principal balance equal or less than $934,200 for 2 units
- Have an unpaid principal balance equal or less than $1,129,250 for 3 units
- Have an unpaid principal balance equal or less than $1,403,400 for 4 units
- Have a loan that was originated before January 1, 2009
- Have a mortgage payment that is more than 31% of gross income Have experienced a significant change
- Have experienced a significant change of income or expenses
Home Affordable Refinance – is available only to loans owned or securitized by Fannie Mae or Freddie Mac. Call your lender at their customer servicer number on your mortgage statement and ask them if your loan is Fannie Mae or Freddie Mac or you can find out by contacting them directly at:
Fannie Mae 1-800-7FANNIE (8am to 8pm EST) or go Here.
Freddie Mac 1-800-FREDDIE (8am to 8pm EST) or go Here.
To be eligible for Home Affordable Refinance, a borrower must:
- Be owner-occupant
- Have sufficient income to support the new mortgage debt
- Have a first mortgage that does not exceed 105% of the property’s current market value
- Have NO delinquent mortgage payments
- Have your junior or second lien holder (if any) subordinate to the new first mortgage
If you need more details or updates on the Making Home Affordable go to: making home affordable.
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