Mortgage Loan Modification Most Asked Questions

The mortgage crisis has many homeowners becoming very anxious to get rid of a unaffordable home loan due to a number of reasons. Some solutions for homeowners are to either refinance or get a loan modification from their bank or lender. Since home values have been decreasing some homeowners simply walked away or were unsuccessful in modifying their home loan. Here are some valuable steps to get you the desired results in your favor.

1. How do I determine if I am eligible for a home loan modification? 

If you can show evidence to your lender or loan servicing company that you have experienced a financial hardship, such as an adjustable rate loan that is about to reset to a higher rate, plus you currently have the income to afford a lower loan payment if given the mortgage loan modification, you are eligible.

2. OK, what hardships are acceptable? 

Although each hardship is determined separately, the lender will usually consider these to be honored:  a death in family, loss of employment or less hours, relocation for work, medical problems (hospitalized, bills), divorce, separation.  Homeowners will need to write a hardship letter to the lender explaining their overall circumstances to the bank.

3. Am I eligible for a loan modification if I owe more on my house that it is worth?  This actually helps your case and should work in your favor, because a home value that is substantially less than the current market value will make the lender sway away from foreclosing as they could lose even more money approximately $30,000 per foreclosed home.  So keeping you in your house and making payments may be the best solution for all parties involved.

4. I have contacted my lender but they will not discuss my situation until I am behind on my payments?  Each lender has different policies for prioritizing their mortgage loan modifications. Most of the time homeowners who are confronting foreclosure are being assisted first.  However, many lenders are starting to communicate with borrowers who will face adjustable rate loan increases in the near future

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5. What about these mortgage loan modification companies claiming they provide me the best opportunity for a loan modification?  The majority of loan modification companies are new companies to get in on the start of the loan modification boom.  Since some homeowners are not comfortable dealing directly with their lender, or do not think they have sufficient knowledge to actually get the desired outcome, a loan modification company can represent you with an upfront fee.  Although certain state laws prohibit them from receiving an upfront fee if you are 3 months behind and in some cases two months behind. Some of these companies are reputable and want to honestly help you but don’t have the experience or proper personnel to get it done. As a rule of thumb, do your research on the company before you agree to anything and make sure to learn about the loan modification process so you can be ready to have loan modified correctly with the proper company.

6. What is a legitimate loan modification company?

A legitimate loan modification company is one which has an attorney in the office, where your file is being processed by experienced paralegals, not a “loan processor who is beginning a new career path”. Also, you should be speaking with a knowledgeable bank debt negotiator or they at least have one on their roster.  More importantly, use a company that performs a forensic analysis on your loan file for Truth in Lending and RESPA violations. Companies like these have usually been around for years.

What is Loan Modification

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