Posted on: 13th Nov, 2007 03:08am
If you're facing financial hardships and almost on the brink of foreclosure, then you can negotiate with your lender for a workout plan to avert foreclosure. You have few options available before you to avoid foreclosure. These options are deed in lieu, short sale, forbearance and of course loan modification.
- What is a loan modification program?
- Are you eligible for mortgage modifications?
- What are the different loan modification programs?
- When is loan modification right for you?
- What are the benefits of loan modification program?
- What should you remember at the time of loan modification?
- What are the outcomes of a mortgage modification?
- How much time does loan modification take?
What is a loan modification program?
Mortgage loan modification is a program where your lender agrees to reduce your mortgage rate, extend the loan term, change the type of the loan etc in order to lower down your monthly payments.
Are you eligible for mortgage modifications?
You may be eligible if:
- You're at least 3 months delinquent on the loan.
- You took out the loan more than 12 months ago.
- You have stable income.
- The property has not been sold at a sheriff's sale.
- The property is in good physical condition.
What are the different loan modification programs?
There are a few modification programs which have their unique features. Here we briefly discuss about 2 most prevalent programs.
Treasury Loan Modification Program
This program has been designed by the Obama administration in association with the US Treasury. This is a very inclusive program in the sense that it is not only helping the homeowners currently in financial difficulties but also assisting the homeowners who have lost significant equity in their homes and who are foreseeing tough financial times ahead.
Federal Housing Finance Agency Loan Modification Program
This is the newest mortgage modification program offered by the Federal Housing Finance Agency (FHFA). FHFA serves as the supervisory regulator of Freddie Mac and Fannie Mae. This program is only applicable to the mortgages held by Freddie Mac and Fannie Mae.
Treasury Loan Modification Program
This program has been designed by the Obama administration in association with the US Treasury. This is a very inclusive program in the sense that it is not only helping the homeowners currently in financial difficulties but also assisting the homeowners who have lost significant equity in their homes and who are foreseeing tough financial times ahead.
Federal Housing Finance Agency Loan Modification Program
This is the newest mortgage modification program offered by the Federal Housing Finance Agency (FHFA). FHFA serves as the supervisory regulator of Freddie Mac and Fannie Mae. This program is only applicable to the mortgages held by Freddie Mac and Fannie Mae.
When is loan modification right for you?
Loan modifications are right for you when:
- You have experienced a long-term reduction in income.
- Your monthly expenses have increased.
- You don't have enough income to pay off mortgage dues.
What are the benefits of loan modification program?
This mortgage program alters the terms and conditions of a loan that has been agreed upon between you and your lender. Some of its benefits are listed below.
1. Averts foreclosure
With this you can avoid the severe negative consequences of foreclosure and short sale.
2. Restores credit score
With this you can protect your credit score. Foreclosure damages your score badly and it remains on your credit report for around 7 years.
3. Lowers principal balance
Principal balance is the amount of the loan amount (without interest) that has to be still repaid. Sometimes, be negotiating with the lender, you can lower down the remaining principal balance.
4. Reduces rate of interest
This mortgage program may help you lower down the rate on the loan. This in turn makes payments more affordable for you.
5. Extends the loan term
Loan modification may extend the term of the loan. With extension of the loan term, rate gets lowered. This actually helps you make payments easily.
6. Converts ARM to FRM & vice versa
This offers you the chance to convert an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM) and vice-versa. You may be willing to switch to the safety of making fixed payments offered by FRM from your existing ARM. Again, the rate on your existing FRM may be too high. In such case, you may want to convert FRM to ARM.
7. Waives off late charges
Your late charges may sometimes be waived off by your lender.
1. Averts foreclosure
With this you can avoid the severe negative consequences of foreclosure and short sale.
2. Restores credit score
With this you can protect your credit score. Foreclosure damages your score badly and it remains on your credit report for around 7 years.
3. Lowers principal balance
Principal balance is the amount of the loan amount (without interest) that has to be still repaid. Sometimes, be negotiating with the lender, you can lower down the remaining principal balance.
4. Reduces rate of interest
This mortgage program may help you lower down the rate on the loan. This in turn makes payments more affordable for you.
5. Extends the loan term
Loan modification may extend the term of the loan. With extension of the loan term, rate gets lowered. This actually helps you make payments easily.
6. Converts ARM to FRM & vice versa
This offers you the chance to convert an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM) and vice-versa. You may be willing to switch to the safety of making fixed payments offered by FRM from your existing ARM. Again, the rate on your existing FRM may be too high. In such case, you may want to convert FRM to ARM.
7. Waives off late charges
Your late charges may sometimes be waived off by your lender.
What should you remember at the time of loan modification?
While negotiating on a mortgage modification, you should keep in mind the following points:
- Check out your financial health: You need to review your finances carefully. Lender may ask a personal financial statement from you. You need to keep that ready. Your financial statement should contain a comprehensive list of all your expenses such as credit card bills, utility bills, food expenses and other financial obligations. You should estimate the average expenses on each item for the 3 months in order to better assess your financial health.
- Prepare a hardship letter: In order to apply for a loan modification, you need to prepare a hardship letter . The hardship letter should satisfactorily explain the reasons behind your inability to pay off the mortgage. It should also explain why you are looking for loan modification.
- Gather necessary documents: Before offering you a mortgage modification deal, lender asks for certain documents. You need to keep these documents ready. These documents include :
- Your bank statements and pay-stubs of last 2 months
- W-2 form of last 2 years in support of your annual wage and taxes
- 1040 Form of last 2 years as a proof of annual income tax returns
- Latest mortgage statements
- Hardship letter
- Current property tax statements, if available
- Intimate your lender about your position: It is wise to intimate your lender about your financial position. If you are unable to keep up with the mortgage payments, lender may offer you a loan modification program. But, for that you need to contact your lender
- Complete the necessary paperwork: Before approving your loan modification appeal, lender sends a financial worksheet to you. You need to fill up that worksheet carefully and send it to the lender along with other necessary documents. After receiving all these, lender assesses your financial health and determines whether you can repay your mortgage after modification.
What you need to show is that you are still able to repay your mortgage even if you are not able to meet your current monthly payments. - Get a written agreement: Â If the lender agrees to modify your loan, you should obtain a written confirmation from the lender. Mere verbal confirmation won't suffice .
- Follow the stop gap repayment arrangement: If you apply for loan modification program, lender can't offer it to you with immediate effect. It requires some time (maximum of 60 days) for the lender to make the offer. This time gap is required to check your financial statements, loan status and other documents. During this time, lender wants you to follow a stop gap repayment plan.
What are the outcomes of a mortgage modification?
- You can keep up with mortgage payments.
- You can convert your ARM into a fully amortized FRM.
- The principal, interest, taxes and insurance (PITI), may be or may not be included in the current loan balance.
- If the past dues are added, the modified principal balance amount may be more than 100% of the LTV of the original principal balance.
- Modified loan balance may include administrative charges caused due to the cancellation of foreclosure.
How much time does loan modification take?
You have to wait several hours to file your loan modification appeal. When your turn comes, you have to present your case confidently. You should have all the relevant documents ready with you. This is not a very easy task.
You may have to wait for several weeks to get the final modification offer after your case gets registered. Your lender may tell you about your course of action in the meanwhile. You may be told by the lender to keep on making payments so as to qualify for loan modification. You need to follow it seriously so as to get the approval.
The purpose of loan modification is to ensure that you can better afford your mortgage payments. Make sure you don't miss payments under the modification agreement, as the lender will consider it a new default and it will be harder to negotiate a second modification. With each default, the chance of losing the home in foreclosure rises.
You may have to wait for several weeks to get the final modification offer after your case gets registered. Your lender may tell you about your course of action in the meanwhile. You may be told by the lender to keep on making payments so as to qualify for loan modification. You need to follow it seriously so as to get the approval.
The purpose of loan modification is to ensure that you can better afford your mortgage payments. Make sure you don't miss payments under the modification agreement, as the lender will consider it a new default and it will be harder to negotiate a second modification. With each default, the chance of losing the home in foreclosure rises.
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I was out of work for 3 months back in the late spring and early summer. After I obtained a new job I spoke with my lender and they wanted me to pay a three month "good faith" payment which was only a little above my current payment. I paid those 3 "good faith" payments and now I received a loan modification letter. The letter sets my loan back to 360 months and totally offsets the 2 years I have been paying on the loan. I owed 78,000 on my home and now according to this i will now owe 84,000. THis also increased my monthly payment by over $105 a month. THere is no way I can afford this. I thought a mortgage modification is supposed to help not hurt?? Any ideas on what I should do, I am very confused and lost. THanks in advance.
meta title:
Mortgage loan modification
hi doo wop,
did they give you a reason as to why you did not qualify for the homeowner's initiative loan modification? you have the right to ask the lender about the reasons for not qualifying for the homeowner's initiative loan modification.
if you are not satisfied with the loan modification offered to you by your lender, you can definitely apply for a deed in lieu of foreclosure. though it will reduce your credit score, you won't be liable for the deficient amount resulting from the sale of the property.
if you can pay cash and buy a property, then you don't have to worry about credit effects or getting a mortgage. however, just for your information, a deed in lieu of foreclosure would reduce your credit score by 250 points.
thanks
did they give you a reason as to why you did not qualify for the homeowner's initiative loan modification? you have the right to ask the lender about the reasons for not qualifying for the homeowner's initiative loan modification.
if you are not satisfied with the loan modification offered to you by your lender, you can definitely apply for a deed in lieu of foreclosure. though it will reduce your credit score, you won't be liable for the deficient amount resulting from the sale of the property.
if you can pay cash and buy a property, then you don't have to worry about credit effects or getting a mortgage. however, just for your information, a deed in lieu of foreclosure would reduce your credit score by 250 points.
thanks
my loan was modified in jan 09 i am now facing foreclosure again can i have another modification
You cna alwys try and ask for one more modification. But the chances of gettign a second modification are very less.
The reason being, the bank already gave you an opprtunity, for what ever the reason may be beoynd your control you could not keep making paymets as commited.
Bank will think, wht if you do the same thing again
The reason being, the bank already gave you an opprtunity, for what ever the reason may be beoynd your control you could not keep making paymets as commited.
Bank will think, wht if you do the same thing again
Hi borke,
Aren't you paying as per the modified terms given to you by your lender? If you're facing foreclosure, then you can apply for a loan modification again. But, I guess, it would be the discretion of the lender whether or not he would accept it.
Thanks
Aren't you paying as per the modified terms given to you by your lender? If you're facing foreclosure, then you can apply for a loan modification again. But, I guess, it would be the discretion of the lender whether or not he would accept it.
Thanks
Thats a good question james
Yep it is up to the lender to decide, if they will do one more modification
As mentioned before, it will be difficult, but you never know
Yep it is up to the lender to decide, if they will do one more modification
As mentioned before, it will be difficult, but you never know
A lot depends upon your lender. you can try for it. but lender will surely ask about reason of second modication. so be prepared.
You need to give confidence that you can make timely payments. other wise chances are very few
You need to give confidence that you can make timely payments. other wise chances are very few
If you are given second chance, I would say use it wisely
How long does it really take to get a mortgage modification?
My mortgage is with Chase are they a good bank?
My husband has been out of work since 04/2008 We have been our home
15 yrs and it was a old home already, built in 1984.
thank you
really worried
My mortgage is with Chase are they a good bank?
My husband has been out of work since 04/2008 We have been our home
15 yrs and it was a old home already, built in 1984.
thank you
really worried
The modification process can vary from bank to bank and also person to person
Depndign on the situation
Have you submitted all teh documentation to the bank as asked by them?
Also how long ago did you submit and have you contacted ther bank since then
Rememeber the loan modification process is desinged for some one who is in financial stress and if you can prove that, then you have a good chance of modification being done
Depndign on the situation
Have you submitted all teh documentation to the bank as asked by them?
Also how long ago did you submit and have you contacted ther bank since then
Rememeber the loan modification process is desinged for some one who is in financial stress and if you can prove that, then you have a good chance of modification being done
can a mortgage company start forclosure proceedings after you have applied for a loan modification
That is possible.
Call the customer service and check with them and see whats the reason, while you are goign thorugh the modification process
Call the customer service and check with them and see whats the reason, while you are goign thorugh the modification process
Hi Tracy,
If the loan modification process has already started, then the lender will not foreclose the property. If the lender has started the foreclosure procedure, then there are chances that the lender has rejected your loan modification offer.
If the loan modification process has already started, then the lender will not foreclose the property. If the lender has started the foreclosure procedure, then there are chances that the lender has rejected your loan modification offer.
It is very to get on the trial but very hard to get a permanent mod. The servicers are not following the directives and the whole system is a huge mess.
Foreclose sales are happening even when in trail periods. They lose paper work and oppos for get to cancel the sale and your house is sold. If if they deny the mod with no notice the next day your house can be sold with no change to file Chap 13 or take any action to cure.
The Congressional Oversight report last week was very good at showing what a massive problem we have with HAMP - a great progrom not working because of the actions of hte servicers.
Thousands of folks are sharing there expereinces, 90% bad at the loansafe.org forum. Minnesota has started a class action suit based on lack of pro process Constitutional argument. Other suite are being sought.
The HAMP program is a gave risk of faling not because of the program but the denails often for no sound reasons by the servicers that violate the Treasury/Fannie/HAMPAdmin directives.
Foreclose sales are happening even when in trail periods. They lose paper work and oppos for get to cancel the sale and your house is sold. If if they deny the mod with no notice the next day your house can be sold with no change to file Chap 13 or take any action to cure.
The Congressional Oversight report last week was very good at showing what a massive problem we have with HAMP - a great progrom not working because of the actions of hte servicers.
Thousands of folks are sharing there expereinces, 90% bad at the loansafe.org forum. Minnesota has started a class action suit based on lack of pro process Constitutional argument. Other suite are being sought.
The HAMP program is a gave risk of faling not because of the program but the denails often for no sound reasons by the servicers that violate the Treasury/Fannie/HAMPAdmin directives.
My mother co-signed a mortgage for me because it was a very large loan and one I couldn't have gotten a bank to approve, with my relatively small income.
Since that time, I've had very good credit and have never once missed a payment. And I've put together tenants to help me meet the mortgage payments.
Since I've had several years of good credit, might I be able to have a chance of assuming this debt on my own, assuming I want to take my mother off of the loan?
Since she is not in good health and could die, if that happens, god forbid, how might that affect the mortgage? Would that make my family or estate liable for this debt?
With the new opportunities for loan modifications, given that I've got financial hardships, would I have a good chance of getting a loan modification with my mother as co-signer off the loan?
Since that time, I've had very good credit and have never once missed a payment. And I've put together tenants to help me meet the mortgage payments.
Since I've had several years of good credit, might I be able to have a chance of assuming this debt on my own, assuming I want to take my mother off of the loan?
Since she is not in good health and could die, if that happens, god forbid, how might that affect the mortgage? Would that make my family or estate liable for this debt?
With the new opportunities for loan modifications, given that I've got financial hardships, would I have a good chance of getting a loan modification with my mother as co-signer off the loan?
hi chicha,
you can get a loan modification if you are facing financial crisis in paying off the mortgage but it won't help you in removing a co-signer's name from the mortgage docs. in order to remove her name as a cosigner of the loan, you will have to refinance the mortgage. if you are unable to refinance the loan in your name prior to her death, you would still be liable for the loan as you're the primary owner of the mortgage.
you can get a loan modification if you are facing financial crisis in paying off the mortgage but it won't help you in removing a co-signer's name from the mortgage docs. in order to remove her name as a cosigner of the loan, you will have to refinance the mortgage. if you are unable to refinance the loan in your name prior to her death, you would still be liable for the loan as you're the primary owner of the mortgage.