Frequently Asked Questions About Loan Modification
Loan modifications help homeowners who are having trouble keeping up with mortgage payments. As a homeowner, you can work with your lender to modify a loan or, you may be able to take part in the Home Affordable Modification Program offered by the federal government.
Other People Are Reading
-
What is Loan Modification?
-
Loan modification changes the terms and interest in a mortgage to bring the payments down to a level the homeowner can afford. A loan modification will lower the interest rate, increase the length of the loan and, in some cases, change the type of loan--such as changing from an interest-only or adjustable-rate mortgage to a fixed-rate mortgage.
What is the Government's Role?
-
The federal government created the Home Affordable Modification Program (HAMP) to assist homeowners with loan modifications. The government offers subsidies to participating as well as non-participating lenders and servicers to help the most people.The program website contains loan modification information. You can apply for a loan modification even if your lender or loan servicer does not currently participate in the program. Federal law requires participation for servicers of loans guaranteed or owned by Freddie Mac or Fannie Mae.
-
Can I Modify a Second Mortgage?
-
According to the Home Affordable Modification Program, you can modify a second mortgage through HAMP if the first mortgage has already been modified within the program. Participating lenders are given incentives to modify or forgive second mortgages. Non-participating lenders may also allow modification of second liens but that policy will vary by lender.
What Are The Basic Qualifications?
-
MakingHomeAffordable.gov states that the house must be your primary residence; the mortgage must have been started before Jan. 1, 2009; the mortgage has to be $729,750 or less and the payment must be more than 31 percent of your income. You must also have a documented hardship that prevents you from making your current payments.
What is a Hardship?
-
A hardship is a circumstance that makes you unable to keep up with your mortgage payments. Unemployment, reduction in pay, divorce, death of a spouse or other changes in your finances can qualify as hardships.
What if I'm Unemployed?
-
The federal Home Affordable Unemployment Program (HAUP) provides unemployed homeowners with a temporary reduction or forbearance from mortgage payments for at least three months. You cannot have a previously modified mortgage under HAMP and participate in HAUP .
Can Lenders Require an Inspection?
-
According to the Department of Housing and Urban Development, your lender or servicer can request an inspection before agreeing to modify your loan. The inspection will ensure the property is still in good shape and does not need serious repair that may be too expensive for you to handle after loan modification.
What Interest Rate Will I Receive?
-
The Department of Housing and Urban Development states your lender must reduce the interest rate on your loan to the current market rate as of the date the loan modification was approved.
-
References
- MakingHomeAffordable.gov: Borrower FAQs
- MakingHomeAffordable.gov: Loan Modification Eligibility
- MakingHomeAffordable.gov: Second Lien Modification Program
- MakingHomeAffordable.gov: What is the Home Affordable Unemployment Program (UP)?
- U.S.. Department of Housing and Urban Development: Loan Modification Frequently Asked Questions
Resources
- Photo Credit house image by Earl Robbins from Fotolia.com
