How to Request a Loan Modification

A loan modification, sometimes called a "workout," is a way to restructure a loan so that a borrower can better afford and manage payments. It commonly refers to a real-estate mortgage loan. A modification might include a decrease of the loan rate, rolling past-due amounts into the loan or simply reducing the monthly payment amount. If you want to request a loan modification, prepare yourself for an evaluation procedure similar to what you did when you closed on the loan.

Instructions

1. Gather information about your financial situation. That includes a list of your monthly expenses (including balances on all debt accounts), pay stubs for all borrowers, your most recent tax return, bank account statements and the latest statement on the loan for which you're seeking a modification.

2. Call your lender to ask for paperwork and the exact process required to request a loan modification. In many cases, you can simply complete the application over the phone, but you may want to ask to receive the paperwork via mail or fax so you have time to look the information over thoroughly before applying. The package includes a hardship affidavit form.

3. Examine the requirements for getting approved for a loan modification --- it may vary by lender. In the case of a mortgage loan modification, a borrower who has a home worth less than the current balance on the loan may be eligible. It is also applicable to a borrower who has trouble making the payment due to unemployment or a reduction in income.

4. Fill out your hardship affidavit. It requests detailed information about your financial situation, including income, assets, bills and the reason why you're having trouble making payments. You can provide a detailed account of your financial situation to explain why you're requesting the modification.

5. Send in the completed affidavit and loan modification paperwork required by your lender for review. If you are eligible, the lender will call you to discuss the terms of your modification.

Tips & Warnings

• Consult a lawyer and a nonprofit credit-counseling company in your area before proceeding with the loan modification process.

References

• Zillow: What Is a Loan Modification and Who Qualifies for One?

Resources

• Indymac Mortgage Services: Request for Modification and Affidavit (RMA)
• National Foundation for Credit Counseling: Homepage