Here's what you need to know about loan modification and how it works. Modifying your mortgage is a temporary or permanent way to avoid foreclosure. Instead, it changes your original loan by adjusting the length of your loan, lowering your interest rate, or switching from an adjustable-rate mortgage to a fixed-rate mortgage, hopefully with better terms.
However, if you're still thinking a mortgage refinance is the ideal personal finance option for you, then head over to multi-lender site Credible to compare rates and mortgage lenders. Find your prequalified rates today by inserting some simple information into Credible's tools. Credible can help you crunch the numbers. In just three minutes, you can get prequalified rates from multiple home mortgage lenders without impacting your credit score.
Reasons for imminent default include the loss of a job, loss of a spouse, a disability or an illness that has affected your ability to repay your mortgage on the original loan terms. Some lenders and servicers offer their own loan modification programs, and the changes they make to your terms may be either temporary or permanent. The federal government previously offered the Home Affordable Modification Program, but it expired at the end of Now, Fannie Mae and Freddie Mac have a foreclosure-prevention program, called the Flex Modification program , which went into effect Oct.
If your mortgage is owned or guaranteed by either Fannie or Freddie, you may be eligible for this program. HARP has also expired. If you are struggling to make your mortgage payments, contact your lender or servicer immediately and ask about your options.
Avoiding phone calls or procrastinating will only make matters worse. The loan modification application process varies from lender to lender; some require proof of hardship, and others require a hardship letter explaining why you need the modification.
Consider working with a HUD-approved housing counselor , who can assist you for free in challenging the decision and help you understand your options. One potential downside to a loan modification: It may be added to your credit report and could negatively impact your credit score. If your modification is temporary, you'll likely need to return to the original terms of your mortgage and repay the amount that was deferred before you can qualify for a new purchase or refinance loan.
After permanent modifications, lenders may want to see a record of 12 or even 24 on-time payments to determine your ability to repay a new loan. Also, many modification companies are scammers who will do little or nothing to help you in the process.
If you handle the modification application process yourself, you can respond to any inquiries or requests from the servicer promptly. Loan modification companies often fail to respond to requests from the servicer, or they respond after weeks or months go by, leading to a modification denial. Also, you're in the best position to deal with any inquiries or requests for additional documentation.
Only you know all of your particular situation's details and have access to the paperwork that the servicer might want. The vast majority of modification companies are scammers. They'll take your money, and you'll get very little in return—certainly, nothing that you couldn't have done yourself.
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.
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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.
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