How do I request a mortgage modification?

You need to send in a hardship letter to your lender thereby explaining why you can't keep up with your payments and need a mortgage modification. Submit your financial statement and other documents such as bank statements, paystubs, mortgage statements etc.

Should I stop payments while applying for modification?

You need not stop payments while applying for a modification. There are lenders who'd agree to modify your loan terms even if you aren't in default. Moreover, as per Home Affordable Modification Program, lenders can modify loans even when you haven't missed payments but you're at imminent risk of default.

What is the ideal debt-to-income ratio for modification?

The debt-to-income ratio (DTI) required for modification would vary from one lender to another. However, most lenders would need you to have no more than 45% DTI. Under the government's modification plan, lenders need to bring down borrowers' monthly payments to no more than 38% DTI. The government will then help them further reduce the DTI to no more than 31% of the borrower's monthly income.

Do unemployed homeowners qualify for modification?

No, lenders require you to have an income source in order to qualify for modification.

Can lenders include late charges when they modify loans?

As per HUD rules, late charges should be waived by lenders when they modify loans. However, this depends more upon the type of loan and the lender's policies.

How long does it take to get approved for mortgage modification?

Usually it takes around 30 to 90 days to get approved for a modification. This depends upon your lender and how efficiently you can negotiate with the lender.

Does loan modification hurt your credit?

Mortgage modification doesn't hurt your credit. In fact, it'll help restore your credit when you start making payments as per the modified terms and conditions. As long as there aren't any late payments or default under a modification program, your credit will be fine.

Can I re-negotiate terms of modification before signing the papers?

Yes, you can re-negotiate the terms and conditions since you haven't yet signed any paperwork.

What happens if you're in default after modification is approved?

The bank will simply not modify your loan unless it is certain that you'll be able to follow the new payment plan.