Loan Modification
Loan Modification Frequently Asked Questions (FAQ)
1. What is a loan modification? This is when your lender agrees to make a permanent change to your existing home loan that results in a more affordable payment so you can avoid foreclosure and stay in your home. The loan modification may involve a lower interest rate, a longer term or a reduction in the principle balance or some combination of the three.
2. How do I find out if I qualify for a loan modification? The #1 criteria your lender will look for is proof of your ability to afford the modified loan payment now and in the future. You need to supply your lender with proof of your income, along with a complete and accurate financial statement that details your income, expenses and assets.
3. What if I am not currently late on my payments – can I still ask for a loan modification? Yes, most lenders will now accept loan modification applications from borrowers who foresee a problem continuing to make their monthly mortgage payments. It is recommended to that you contact your lender as soon as possible to start the loan modification process.
4. Does a loan modification stop foreclosure? That is the goal of a loan modification. When you work with your lender to find a loan modification solution, your loan is brought current and the foreclosure process is halted. However, if the foreclosure process has begun, applying for a loan modification will not stop the process unless the lender approves the application. The department that handles the loan modification at the lender is normally different from the department that handles the foreclosure.
5. What is an acceptable hardship situation? While each homeowner’s situation is unique, generally the lenders consider divorce/separation, death of spouse or co borrower, illness, job relocation, military service, and medical bills to be acceptable reasons to consider a loan modification. A compelling hardship letter included in your loan modification application package is very important to explain to your lender the circumstances that caused your delinquency and how you plan to rectify the situation.
6. What about my missed payments – can they be added back into my loan? Yes, generally your missed payments can be added to the new loan balance and then spread out over the term so you can then afford the new loan payment.
7. Can my late charges and fees be included in the loan modification or do I have to pay those first? Per HUD, the accrued late charges should be waived by your lender at the time of the loan modification. This ruling varies depending on your lender and the type of loan (FHA insured or not). Always ask for a complete accounting and breakdown of all fees and penalties from your lender – this is your legal right – some fees and penalties are prohibited
8. Are there any other costs involved? Appraisal, credit report, title, closing costs, broker fees, etc.? There are no other costs associated with a loan modification. The banks are modifying loans for no charge. They may sometime ask for a trial period, which demonstrates that you are serious about staying in your home. However, most companies that offer to negotiate your loan modification will have charges of their own, which are payable if they succeed in getting your loan modification approved and if you accept it. You should always ask before agreeing to work with a particular company.
9. How long does the process take? Every bank is different, but it typically takes 30-90 days or more to settle on a loan modification agreement.
10. Can I do my own loan modification or should I hire a company? You can certainly do it yourself, as long as you have some upfront knowledge and preparation. Once you understand what your lender needs to see, you can prepare your application properly. If, however, you do not feel comfortable dealing with your bank, you can pay a third party company to represent you. Be sure to do your research first, there have been reports of homeowners paying large upfront fees with no results at all.
To find out if you qualify for a loan modification, fill in the box on the right or contact us by phone or email. If you qualify, we will guide you step by step how to submit your application for Free.
