Mortgage Loan Modifications

What Are Mortgage Loan Modifications?

Are you like thousands of other Americans who have lost their jobs because of the economic recession and are now really struggling to make mortgage repayments each month? Or perhaps a member of your family has fallen unexpectedly ill and you’re paying out large amounts of your salary on medical costs, money which should be paying the mortgage. These kind of scenarios are when a mortgage loan modification might be a good option for you.

With a mortgage loan modification, you work with your mortgage lender to try and re-structure your mortgage repayments so they are better suited to your new financial situation. The main target is to reduce your monthly repayments so they equate to 31% or less, of your pre-tax salary. In order to make this possible the lender may extend the loan term or reduce the interest rates charged on your loan. At the end of the day, your lender doesn’t want you to default on your mortgage, as pursuing a foreclosure is an expensive process for them and is really just a final resort.

Who Is Eligible For One?

It must be your main place of residence. If you bought the property as an investment then unfortunately you won’t be eligible.

Lenders will consider any borrower who has missed a payment or who is showing signs they are really struggling to meet repayments and are at risk of defaulting.

If your monthly repayments are greater than 31% of the salary you earn prior to tax being deducted.

If you’re “underwater”, whereby the remaining balance of your mortgage exceeds the market value of your home, you’ll be eligible usually.

Mortgage Loan Modification Tips

If your financial circumstances have changed and its obvious you’re going to struggle to meet the repayments, apply now, don’t wait until you’re already failing to meet repayment deadlines as this could result in a foreclosure.

Provide all the relevant documentation and be honest about it. The lender will require you to send various documents so they can assess your situation and decide on whether they think you qualify. To make the whole process quicker, make sure all the information you provide is both up to date and correct.

Keep records every step of the way. This is super important as if the worst does come to the worst and the lender files for a foreclosure, you’ll have proof that you tried to find a solution and this may well help your cause.

Be pro-active. Don’t just apply and wait for a call. Get on the phone every few days to check the status of your application. This could be the difference between keeping your home and losing it so make a nuisance of yourself if you have to.

If you’re really struggling to keep up with repayments because things have changed and everything has got on top of you, then a mortgage loan modification could be the light at the end of the tunnel you have been looking for. The important thing is to be pro-active, don’t just sit around and wait to be notified of your imminent foreclosure, apply today.

Home Loan Modification and the Making Home Affordable Program

The following is a list of the current Home Loan Modification options offered under the MHA plan (taken from www.makinghomeaffordable.gov): Home Affordable Modification Program SM (HAMPSM), Principal Reduction Alternative SM (PRA), Second Lien Modification Program (2MP), FHA Home Affordable Modification Program (FHA-HAMP), USDA’s Special Loan Servicing, Veteran’s Affairs Home Affordable Modification (VA-HAMP), Home Affordable Foreclosure Alternatives Program (HAFA), Second Lien Modification Program for Federal Housing Administration Loans (FHA-2LP), Home Affordable Refinance Program (HARP), FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance), Home Affordable Unemployment Program (UP), Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF)