What is a Loan Modification?
A process between the Lender and a borrower where the loan terms are restructured without refinancing. The rate, term, and possibly the principal amount of the loan are modified to fit the borrower's current financial situation.
Are you a good candidate for Loan Modification?
Any homeowner currently looking to make a positive change on their existing mortgage note without going through an entire refinance process is a candidate for a Loan Modification. Millions of Americans have a mortgage they are currently not happy with. The FDIC is estimating that more than 2 million loan modifications will take place during 2009.
Is A Loan Modification A Refinance?
A Loan Modification does not require doing an appraisal, qualifying within current guidelines, and paying closing costs which are required when doing a Refinance. When doing a Loan Modification, you are simply modifying your existing terms within your Mortgage Note you already have with your Lender.
If I haven't experienced a “hardship” or I am not struggling with my mortgage payment? Can I still take advantage of a rate or term reduction?
We have found that some Lenders are interested in maintaining a good relationship with a good customer. A Loan Modification can be a great way to maintain this relationship. It is more expensive to find a new customer than it is to maintain an existing customer.
Are Lenders willing to go through this process? Why would a Lender accept less, and/or change their rate and terms to help me?
Most homeowners don’t realize that Lenders do not want to foreclose on your home. In the current market, Lenders will lose money by taking your home. We have found that the majority of Lenders are very open to the Loan Modification process. The costs that Lenders incur from a foreclosed property typically average 20% of the total value. The thing to remember is that Lenders are in the business of making loans, not to owning your real estate.
How long does it take to get a Loan Modification?
The entire process to get a Loan Modification can take 10 days to several months. This depends on the stage of your mortgage, your financial position, and most importantly who your Lender is. During this process, most Lenders have been halting foreclosure proceedings associated to any Loan Modification requests.
What should I do if I don’t understand the Modification Agreement my Lender has sent me?
You should first contact your HUD approved counselor and advise them that you received an agreement directly from your lender. Otherwise, you may want to seek professional advice from you Account or Attorney.
What do I do if my Lender has turned me down for a Loan Modification?
We have found that sometimes you may now be able to make additional lifestyle changes in accordance to the tips offered through this site. If you find that you are able to make additional changes contact your counselor and ask to re-submit your file. As a last resort, you may want to review some of the other alternatives you may want to exercise listed with the “Homeowner Options” area of our site.
What do I do if I can’t find a “hardship” letter relevant to my situation?
In this case, you should use the “Free Form” letter provided which allows for full customization.
What should I do in the income section if I have no income?
In this case, you would simply input “0.00” in the income field and input “none” in the source field. If this is the case, we strongly recommend that you review the tips to see other forms of income that may qualify in your situation
Is there someone that I can speak to for more personalized service?
Yes, you may contact a counselor direct through the available hotline listed on the homepage of this site.
What should I do within the income section if I have more than one employer?
Within the Income section we provide three “Other Income” fields. When using additional employer, utilize “Second Job” as the income source.
How should I document income received from a roommate?
Lenders typically ask for a letter written by you acknowledging how much and whom you receive this rental income from.
How can Debt Management help me better qualify for a Loan Modification?
If your credit card monthly payments are high, a Debt Management Plan can drastically reduce your monthly obligations to your credit card companies which would result in lowering your obligations within your Financial Worksheet. Lenders typically only request a letter from a Debt Management company prior to allowing the elimination of any monthly credit card expenses. Your counselor can provide further information and help you determine if a Debt Management plan is right for you.
What should I do to document any existing expenses that I am getting rid of?
Debt obligations listed on your credit report may be eliminated with proper explanation and/or proper written validation. Otherwise, you may not have to document anything unless your Lender questions your expenses which then you may need to verbally explain your plan to reduce your monthly obligation.
What should I do if my Lender has taken a long time to respond to my request?
Based on the market conditions many Lenders are taking a very long time to process Modification requests. We recommend that you be persistent and continue to follow up weekly.
What should I do if the probability meter is showing a low approval rating?
You should review the tips available listed within the “Success Tips” of the site to reach a good probability percentage. Please keep in mind that even if the probability meter reflects low probability, this does not mean that you will not get approved.
What should I do if I have more mortgages or debt than the spaces allow me to input on the “Financial Worksheet”?
If you have more debt than the Financial Worksheet allows room for, we suggest that you combine these debts under the other expenses input field and label the field “Additional Combined Debt”.
How long do I have to act?
Time is of the essence if you are behind on house payments. Each day that passes makes it that much harder to get a work out agreement with your Lender that you can live with. The home foreclosure process can take anywhere from a few months to a year, depending on your state law and the method of foreclosure your Lender chooses to use.
What does "Acceleration Clause" Mean?
An “Acceleration Clause” allows the Lender to demand payment of the entire balance of the mortgage in one lump sum if a borrower is in default.
What is considered a Hardship?
Hardship can be described as a job loss, job relocation, divorce/separation, family death, illness, military service, pregnancy and many others circumstances which cause the homeowner to experience major change within their life.
What does a “Notice of Default” mean?
A “Notice of Default” (N.O.D.) is when the Lender has contacted an attorney and the foreclosure process has begun.
Do I have any other options in saving my home from foreclosure?
As a last resort, you may want to review some of the other alternatives you may want to exercise listed with the “Homeowner Options” area of our site.
What should I list as my "Employer Name" and "Hire Date" in Step 1: Borrower Information if I or the Co-Borrower is unemployed?
If you or the Co-Borrower is unemployed you should list "Unemployed" in the "Employer Name" field and list the date that you began your Unemployment in the "Hire Date" field.