How to Get a Loan Modification From Your Lender or Servicer

A mortgage loan modification can help you avoid losing your home.

Getting behind on your mortgage payments can be an intensely stressful situation, and can be difficult to recover from. If you default on your mortgage, your lender can accelerate your loan, which means that it can demand full payment of the entire mortgage balance. It can also initiate foreclosure proceedings and sell your home. A mortgage loan modification is an option that can bring you current on your loan and help you avoid acceleration and foreclosure. It can also reduce your monthly mortgage payment by lowering your interest rate or extending your loan terms.

Instructions

1. Call your lender. Explain your financial situation and tell the representative that you want to bring your loan current and avoid acceleration and foreclosure. Advise the representative that you would like to qualify for a mortgage loan modification.

2. Provide the representative with data regarding your income and expenses. The representative will ask you questions about how much you and your spouse earn, and about expenses such as utilities, credit card payments, car loan payments, groceries, entertainment expenses and daycare costs.

3. Verify that you and your family occupy the home. Your lender cannot provide a mortgage loan modification on a second home or investment property.

4. Fax or mail documentation of your income and expenses to your lender. The lender will use this information to verify the information you provided over the phone.

5. Write a hardship letter. This letter expresses your desire to bring your loan current and states that you cannot afford your current mortgage payments because of a change in financial circumstances. It also details the financial circumstances that caused you to fall behind on your mortgage payments.

6. Sign and return the mortgage loan modification agreement, along with the hardship letter. Your lender may require notarization of the agreement.

7. Pay each of the three trial payments by the due date. Obtaining a permanent mortgage loan modification hinges on successfully making three trial payments. This shows the lender that you can handle the reduced payments.

8. Obtain written verification from your lender of the permanent status of your mortgage loan modification after you have successfully made your trial payments. Continue making your payments as agreed.

Tips & Warnings

• Gather your financial information before you call your lender. Having pay stubs, utility bills, installment loan statements, bank statements and other financial paperwork ready can make the call go more quickly and smoothly.

• Remember that your mortgage lender wants to help you bring your loan current. Foreclosure is a long and expensive process, and lenders typically lose money when selling foreclosed homes at auction.

• Avoid responding to advertisements by companies offering to help you obtain a mortgage loan modification. Although some third-party companies are legitimate, others may charge hefty fees, and may not provide beneficial services. Contacting your lender directly is the most effective method for obtaining a loan modification.

References

• U.S. Department of Housing and Urban Development: Loan Modification Frequently Asked Questions
• "The Seattle Times";: What to Do When Foreclosure Looms; Alan Heavens; June 2011

Resources

• Making Home Affordable