Mortgage loan modification is a popular option that many homeowners are using to save their homes from foreclosure. The purpose of a mortgage loan modification is to help you if you are experiencing a financial hardship and can longer afford to make your current mortgage payment by modifying your existing mortgage. You do not have to be in default to obtain a loan modification. You just need to prove to your lender that you have a financial hardship. You will need to show that you have sufficient income to make your new payment though. Lenders will usually lower the interest rate and extend the loan term so that you will have a much more affordable monthly payment, and you can keep your home. If you are unemployed, then you may want to look into other options such as a short sale, deed in lieu of foreclosure or forbearance.
Eligibility
The following are considered financial hardships that qualify for a loan modification:
- Loss of job
- A reduction in income
- Illness or disability
- Death of co-borrower
- Divorce
The lender will require that you submit financial documentation including bank statements, tax returns, W-2’s or 1099’s and your last two pay check stubs to determine if you qualify for the modification. The lender will only agree to modify your loan once so you should be sure that the modification is the best option for your financial situation. It is a good idea to speak to an attorney to find out what other options may be available as well.
Government Assistance
The government’s Home Affordable Modification Program (HAMP) is available to homeowners who meet the following guidelines:
- The loan must have must have originated on or before January 1, 2009
- Only owner occupied primary residence (1-4 units) qualifies. No investment properties qualify.
- Mortgage payment must exceed 31% of gross income
- Have a financial hardship that can be documented
- Unpaid principal balance must be equal to or less than $729,750 for a single family home (limits are higher for 2-4 units)
- Unemployed borrowers who have been turned down by HAMP are eligible under the UP program for forbearance if you have been unemployed for at least three months. You have to be able to document your unemployment. The forbearance program will either reduce your principal or allow you to make payments over a short period of time to catch up on your past-due payments.
Scams
There are numerous companies and scam artists trying to make money off of people who are losing their homes by offering loan modification services. While most loan modification companies are legitimate, you should be careful who you do business with. Ask for references, and don’t give any large amounts of money upfront. These crooks will just take your money and do nothing for you. You could end up losing your home to foreclosure. It is important to work with someone you trust.
Speak with an Attorney
A real estate foreclosure defense attorney can assist you with your loan modification application and negotiations with your lender. The attorney is an expert in mortgage laws, and can explain the benefits and disadvantages of a loan modification to you.
