Loan Modification Questions
The loan modification process is frustrating and confusing for many homeowners. If you’re considering contacting your lender about a loan modification to avoid foreclosure, you need to get as much information as possible so you will be better prepared and able to present your case in the best light. Programs and guidelines are always changing and it’s much easier for homeowners to get the help they are needing. To help you better understand how the process works we have a few questions and answers for you below:
What is a loan modification?
A loan modification is a permanent change in one or more terms of the borrower’s loan. It allows the loan to be reinstated and results in a payment the homeowner can afford.
Can the lender include late charges in the Loan Modification?
The federal plan mandates that a bank waive any administrative charges, late fees and penalties when offering a loan modification.
How do I know if I will qualify for a loan modification?
The criteria your lender is looking at is your ability to make the new modified payment. You need to supply the lender with proof of your income, along with a complete and accurate financial statement detailing your income and expenses to show them that if granted the modification, you will be able to afford the new payment. You must also demonstrate that you’re facing a financial hardship.
Do I have to presently be delinquent on my payments to get a loan modification?
President Obama has included a special incentive under the Home Affordable Modification Plan that will pay lenders a bonus for reaching out to homeowners not yet delinquent but at risk in the future. The goal is to help borrowers before they fall into default.
What is an acceptable Hardship?
Each homeowner has their own set of circumstances that caused them to fall behind on their mortgage, but generally the lenders consider divorce, loss of income, death of spouse, co borrower or family member, illness, job relocation and military service to be acceptable reasons to be considered for a loan modification. A compelling hardship letter included with your application is also very important to include with your application.
Will a loan modification help stop foreclosure?
Yes, this is the goal. By working with your lender to find a loan workout solution, your loan is brought current and the foreclosure process is stopped.
Will my missed payments be added back into my new loan modification?
Yes, the missed payments can be added to the new loan balance and spread out over the term to allow the loan to be brought current.
Can I do a loan modification myself or should I pay someone to represent me?
That is entirely up to you and your comfort level with dealing with your lender. The Treasury Department is strongly discouraging the payment of any fee to a third party to represent you in a loan workout. Regardless of what you decide, the first thing you should do is learn all you can about the process, your legal rights, and what it takes to get your application approved. An informed homeowner is harder to take advantage of and will have a much greater chance of success.
So how do I get started to modify my loan?
Before contacting your bank’s loss mitigation department or a loan modification company, do your homework. Learn as much as you can about the loan modification process so you can make informed decisions.