Mortgage Loan Modification
What is a Home Loan
Modification?
A
home loan modification is much like a mortgage refinance in that the objective
is to find you a more affordable mortgage payment for your financial situation.
In fact, it is often called a modified refinance. The primary difference is that
instead of looking for a "new" loan you will just simply
"modify" the terms of you existing mortgage.
Why a Loan Modification
Versus Refinancing My Mortgage?
Refinancing
your existing mortgage to obtain a more affordable mortgage payment could still
be an option. Unfortunately, for an increasing percentage of homeowners it is
not. That is precisely what loan modifications are for, the homeowner that has
incurred a financial hardship that prevents other mortgage financing or payment
options.
In
most cases, a loan modification is recommended to homeowners that have a
financial hardship that is preventing them from making their monthly mortgage
payments. Most how are eligible for these types of mortgage modification
programs have already missed one or more payments.
Am I Eligible for a
Loan Modification?
This
will vary depending on who services (i.e., who you send your mortgage payment to
each month) your mortgage. However, most follow very similar qualification
criteria. These are the most common loan modification qualification standards:
·
Experienced a documented hardship or change in
financial circumstances
·
Missed three payment (90 days delinquent) or
more
·
Owns and occupies the property as a primary
residence
·
Not filed bankruptcy
Other
important factors that can effect your eligibility:
·
Do not purposely default to get a loan
modification
·
Make sure you are responsive in working with
your lender
Since
many of the programs do vary in how they work, you should contact your lender
and advise them of your hardship and get more information.
Where Do I Get a Loan
Modification?
Ultimately,
the only place where you can get a loan modification is with the lender or
servicer that current holds your mortgage. Confused as to who this might be? In
this mortgage market, where mortgages are bought, sold, and packaged up into
securities for Wall Street, this part can be the hardest step in the loan
modification process.
The
best place to start is your mortgage coupon book or statement--who do you send
your mortgage payment to each month?
Each
mortgage lender or servicer will have different loan modification programs and
processes. In addition, often the staff at these companies have little training
to handle a loan modification inquiry.
This
is where getting a loan modification can become very challenging. Seeking
expertise in streamlining your loan modification process can often save you a
lot of frustration and money.
What Do I Need to Show
the Bank?
The
bank ultimately is in the business to return a profit to their shareholders,
just like any other business. Consequently, your objective in presenting your
loan modification request is to show that it is in the best interest of the bank
to modify your loan.
What
might support your modification request? Here are the points that you should be
able to show your bank:
·
You have had a material change in your financial
circumstances
·
You have made every effort to make your mortgage
payments
·
You have been cooperative and responsive in
working with them
·
You are not in any way purposefully defaulting
to get a loan modification
·
You are willing to be open, honest, and provide
all necessary documentation
Remember
your bank is essentially making a new loan to you after taking a loss on the
first one. You need to demonstrate to the bank that you are able to pay on the
new modified loan terms.
What Documents Will I
Need?
Your
loan modification package is going to be the most important part of your
mortgage modification efforts. Again, the contents and process for packaging the
information for your lender's consideration will vary, but the critical elements
are typically the same. Here is an example of the documents you will probably
require:
·
A letter documenting and explaining your
hardship
·
Proof of current income and capability to make
modified loan payment
·
Detailed monthly expense report or budget
The
principal purpose of the loan modification package is to provide your lender
with sufficient documentation to evaluate the risk in modifying your mortgage.
The main question your lender is trying to answer is can you pay the new
modified mortgage payment, and will you.
Why Would a Bank Modify
My Mortgage Loan?
Simply
because it is in the best interest of the bank. As you attempt to inquire about
a loan modification do not confuse this transaction with an altruistic act of
kindness. It is fundamentally a transaction that makes more business sense than
the alternative--you defaulting on the entire mortgage and costly foreclosure
proceedings.
It
is also a product of the current economic conditions. There are so many
homeowners that have been pinched by the simultaneous collapse of the housing
market and the economy. This creates a unique circumstance--modifying your
mortgage, to keep you in your home, benefits the bigger economic picture.
Loan Modification
Programs
As
mentioned before, loan modification programs are just becoming mainstream and
therefore there is little standardization. The details of loan modification
programs that you qualify for will start at your lender or a loan modification
counselor that can guide you.
Here
are a few of the most prevalent loan modification programs and resources:
White House/Treasury
Loan Modification Program
The
Obama administration, under the guidance of the US Treasury has created one of
the most inclusive loan modification programs to date. This mortgage
modification program not only helps borrowers in current financial difficulties,
but also good paying homeowners that think they may have challenges in the
future or have lost significant equity in their homes due to the housing market
crisis.
IndyMac Federal Bank
Loan Modification Program
IndyMac
Bank was one of the first financial institutions to broadly offer loan
modifications to their mortgage customers. When the FDIC took over IndyMac it
became the first test bed for an extensive loan modification policy. You are
eligible for this loan modification program if IndyMac Federal Bank holds or
services your mortgage.
Federal Housing Finance
Agency Loan Modification Program
The
most recent of the loan modification programs was the one offered by the Federal
Housing Finance Agency (FHFA), the supervisory regulator of Fannie Mae and
Freddie Mac. This loan modification program applies to any mortgage held or
serviced by Fannie Mae or Freddie Mac.
Major Lender's Loan
Modification Programs
The
largest banks in the US are all offering aggressive loan modification programs
and in some cases issuing foreclosure mortatoria. These programs are expected to
proactively modify hundreds of thousands of mortgage loans.
Source:
http://www.mortgageloan.com/mortgage-loan-modification