Thursday, February 2, 2012

How Does A Mortgage Modification Work?

It’s no surprise that a majority of Americans have gone through ups and downs when it comes to their financial situation.  Some have lost jobs.  Some have suffered depressed home values, an unplanned medical expense, even an unfortunate death of a spouse that could have left an unpaid mortgage.
Fortunately in the United States struggling homeowners may qualify for one of the several mortgage modification programs available to help them pay off their mortgage and save their home.   So if you can demonstrate the factors (detailed below) and continue to stay current on your loan, your lender could reduce your payments, and/or spread out your payments.  Not making a new loan—modifying your current terms on your existing loans.
How does it work do you ask? Will you actually get the relief you need? Here’s what you need to know:
How Many Mortgage Modification Programs are Available?
The leading mortgage modification program is the Making Home Affordable Program, financed by the federal government, but also offered through individual lending banks.  Alternatively there are other programs such as Federal Housing Finance Agency Loan Modification, offered by the Federal Housing Finance Agency, available to homeowners who have a mortgage held by Freddie Mac or Fannie Mae. Lastly, some popular lenders offer their own programs; Citigroup, JP Morgan, Chase, Bank of America all offer their own loan modification program. 
Although there are quite a few different mortgage modification programs available, a majority of homeowners seeking them go through the Making Home Affordable Program.
Are You Eligible for a Modification?
There are several guidelines and restrictions to follow in order to be eligible.  A couple questions to ask yourself:
·         Is the home you are seeking a modification on your primary residence?
·         Are you current on your mortgage payments?
If you answered yes to both these questions, then your best bet is to set up an appointment with your lender’s modification department. Get prepared and be sure to collect and bring in at least 2 months of current pay stubs, tuition bills, utility bills, mortgage statement, auto loan papers, and unemployment checks, anything that illustrates your current situation.
Additionally, be willing and prepared to talk about changes including loss of income, unexpected expenses and depressed home value.  You will be expected to have your modification application and a hardship letter fully prepared including:
·         An explanation and proof you have made an effort to pay your current mortgage payment
·         Demonstrate that you are being cooperative with your bank
·         Be able to fully describe your financial circumstances
·         Be willing to talk and provide all requested documentation.
If granted a modification, it is likely to be granted a trial period during which you will be obligated to make lower mortgage payment.  If you miss a payment during the trial period, your modification could be denied.
Obtaining a mortgage modification can be a lengthy process depending on your individual case, however, it typically varies between 4-6 months.  Trial periods can range from 6-18 months.  So from start to finish, the whole process could take up to 2 years.
The process will be frustrating but try to keep calm and stay on top of your application process.   Keep a log of all the interactions, dates, times, and banker’s name for your records.  Try to remember that you are not alone and that your banker is trying to help.  If you have any doubts or questions do not hesitate to seek the answers you need.


  1. Hello Everyone,
    This is an interesting concept. Mortgage loan modifications have become much more common as lenders try to find creative ways to assist struggling homeowners in keeping their homes instead of falling into foreclosure. Its used to merely lower the interest rate, but the newer version offered by some lenders can switch an adjustable-rate mortgage into a fixed rate. Thanks a lot for sharing this...

    Mortgage Buyers

    1. Thanks for the comment, we appreciate the support. Be sure to spread the word and help us fight for struggling homeowners and save their American dream.