A loan modification process is complicated. Most people have little or no understanding of how to obtain a modification. A modification is when your lender agrees to modify the interest rate and terms of your existing loan to lower your monthly mortgage payments so they are affordable for you. While each lender has different procedures, the basic loan modification process works as follows:
Step 1
Contact your lender, and let them know you are interested in a modification because you are experiencing a financial hardship and can no longer afford your currently mortgage payments. Ask the lender what programs you qualify for, how to access the required forms and where to send them. Find out what other information they need.
Step 2
Speak with a modification attorney to find out other options.
Step 3
Either hire a modification attorney to submit the documentation on your behalf to your lender or submit the documents yourself. You will need to start by submitting a hardship letter and authorization letter authorizing a third party to negotiate on your behalf. Your hardship letter should include the following information:
- Your name, all other borrower’s names and everyone’s contact information including email.
- Loan number, and be sure to attach a copy of your current loan statement.
- Contact information for any third party authorized to negotiate on your behalf. Typically this is your attorney or a loan modification company.
- Clear reason for your financial hardship. The most common reasons are loss of job, wage reduction, divorce, illness, family member died or job relocation. You will need to attach your financial documentation such as your last two paycheck stubs, last two year’s income tax returns, financial statement, recent bank statement and your W-2’s or 1099’s.
Step 4
Follow-up call to lender to make sure they received everything.
Step 5
Weekly follow-up calls to lender regarding status.
Step 6
Lender will assign a negotiator to your case. There is no specific time limit in which the lender has to complete the process. You have to be patient. Typically, a loan modification process takes up to 90 days, but can take as long as 6 months. The negotiator will advise you of the terms of the modification.
Step 7
You can either approve or counter the lender's modification offer. This is where the skills of a modification attorney are the most useful. The attorney knows how to negotiate the best modification loan terms. Here are some items to ask for:
- A principle reduction
- Elimination of any past-due amounts including interest and penalties
- Lower interest rate
- Extended loan term
- Permanent modification
The more you ask for the better. Once you and your lender agree upon the terms, they will send you the modified loan documents. You may want to have your attorney review them. If everything is acceptable to you and/or your attorney, then you can sign the papers and move on with your life. If your lender does not approve your modification, you may be eligible for a short sale, deed in lieu or forbearance. Be persistent and find out what else you may qualify for so you can save your home from foreclosure.
Attorney Assistance
A modification attorney can negotiate more favorable terms for you because the attorney understands the lending laws and the modification process. The attorney knows how to skillfully negotiate with lenders to get favorable outcomes for their clients.
