Loan Modification Process

A loan modification is a change to the loan terms that is agreed to by and between the lender and the homeowner. The lender will modify the existing loan in order to work with the homeowner because of a hardship. The purpose is to help make the loan more affordable. Usually loan modifications are in the form of a rate reduction and/or fixing the rate for a certain period of time and/or even lowering your principal balance in extreme cases. Loan modifications are for borrowers that are delinquent or struggling to make their mortgage payments and suffered a hardship such as a job loss, divorce, or illness. Borrowers can even obtain modifications from their lender to convert to a fixed rate loan from an adjustable rate mortgage.

The earlier the homeowner addresses the issue, the better the chances are of negotiating a lower fixed rate and a payment that is manageable. If the household can afford the home, but not their current mortgage, then they may be eligible for a loan modification. A key factor that is required in every loan modification submission is the existence of some type of a hardship. The hardship can be temporary in nature or permanent, but the borrower must be able to prove the hardship.

The following are a sample of hardships that may get a loan modification request approved:

• Adjustable rate mortgage has re-set (causing an increase in the monthly payments)
• Illness to yourself or family member
• Loss or reduction of income
• Loss of job, changing of jobs
• Damage to the property
• Unable to sell the property
• Failed business
• Job relocation
• Death of a spouse or a family member
• Incarceration
• Divorce or separation

Because saving your home is very important it is crucial to work or at least consult with experts to resolve your situation with the best options available as soon as possible. Please review the steps below:

STEP 1 - CONSULTATION

Consult with a consumer attorney to make sure loan modification is your best option.

STEP 2 - GATHER FINANCIAL DOCUMENTS

You will need the following documents:

• Hardship Letter
• Most Recent Mortgage Statement
• Last 4 Bank Statements
• W2 Forms (Last 2 years)
• Tax Returns (Last 2 years)
• Income and Expense Financial Statement

Have an expert analyze and review your information to help you create a negotiation packet to submit to your lender.

STEP 3 - NEGOTIATIONS

Submit your financial packet to your bank to start negotiations.

STEP 4 - APPROVAL

If your modification request is approved, all final modification documents (a new agreement) will be sent to you to get your approval. Remember, this will not happen overnight, however, in most cases it takes 30 to 60 days to complete the process.

Last Modified: Friday, March 22, 2013